OEMs have been undertaking price hikes over the last few months owing to the continued input cost pressures.
Data shows that while domestic sales volume increased 15.7% on a year-on-year basis, it saw a drop of 5% on a monthly basis due to the multiple price hikes and semiconductor shortages.
Exports too fell 5.7% on an annual basis due to the uptick in oil prices and a supply-side crunch as China reels from a resurgence in Covid cases.
Pune-based auto component manufacturer Bharat Forge in its Q4 earnings update earlier this week said that supply chain issues continue to be widespread and are not restricted to semiconductors. ”Additionally, local lockdowns/ geopolitical situation in certain geographies is negatively impacting internationally sourced materials and overall causing high inflation,” it said.
Ratings firm CareEdge in a note said that it expects consumer sentiments to get dampened owing to price hikes by OEMs and fuel inflation.
“The RBI’s decision to increase the repo rate by 40 bps will lead to more expensive auto loans and thus hurt demand further. In addition, concerns regarding global supply chain constraints due to the lockdown in China and the Russia-Ukraine war also persist,” it said.
“RBI’s move of increasing repo rate by 40 bps has clearly taken everyone off guard. This move will apply brakes and dampen the sentiments further,” the Federation of Automobile Dealers Association had said earlier this month.
Outlook for the fiscal
Factors including increased government spending on infrastructure, a normal southwest monsoon, new product launches by OEMs, and pent-up demand will support the growth of the sector in the ongoing fiscal.
Research has said that this fiscal, commercial vehicles (CVs) and passenger vehicles (PVs) volume could grow 18% and 12%, respectively, after rising 26% and 13% in the previous fiscal.
However, two-wheelers and tractors are expected to underperform once again, on a high base effect. The recovery and robust growth in the tractors segment hinge on the prediction of a normal monsoon coming true.
“CV demand growth, particularly for medium and heavy commercial vehicles (MHCVs), is expected to be backed by replacement demand because of improved utilisation and profitability of fleet operators, and government spending on infrastructure,” Pushan Sharma, Director, CRISIL Research said.
While at present semiconductor issues still persist, analysts expect them to ease by the second half of FY23.
“Semiconductors supply constraints and container availability issues are expected to impact sales and production in the near term, which we believe would get resolved in H2FY23,” as per
Analysts expect the three-wheeler and M&HCV segments to witness a strong double-digit volume growth in the ongoing fiscal. “We believe the long-term fundamentals continue to remain intact for the automobile sector,” Reliance Securities said.