The uneven monsoon's influence on rural demand is a worry, and the auto industry is expected to develop somewhat in FY24: ACRA

 The uneven monsoon's influence on rural demand is a worry, and the auto industry is expected to develop somewhat in FY24: ACRA

Over the last two years, the sector has had a renaissance, spurred by increasing mobility and a rebound in economic activity. However, the rate of revival has varied somewhat throughout the different automotive categories, according to a statement from ICRA.

According to ratings agency ICRA, India's domestic car sector is predicted to have modest volume increase in FY24, but a persistent improvement in demand sentiment is yet to be seen due to worries about how an uneven monsoon would affect demand in rural areas.

Over the last two years, the sector has had a renaissance, spurred by increasing mobility and a rebound in economic activity. However, the rate of revival has varied somewhat throughout the different automotive categories, according to a statement from ICRA.

The propensity for personal mobility and steady semiconductor supply helped the passenger car category achieve all-time high volume levels in FY23. The segment's demand emotions are predicted to stay positive, with 6–9% year-over-year (YoY) growth in FY2024, it said.

Comparably, the total industry volumes for the commercial vehicle sector are anticipated to reach pre-pandemic highs, even if growth is anticipated to remain moderate in FY24, ranging from 2-4 percent YoY, on a sound foundation.

According to ICRA, the category had strong volume growth in FY23 on a reduced basis. The ratings agency said that, in contrast to these two divisions, the two-wheeler industry has struggled, with industry volumes remaining below the pre-Covid peak levels.

In FY2024, we anticipate growth in all automotive sector categories to remain at modest levels. ICRA Senior Vice President & Group President - Corporate Ratings Shamsher Dewan said that "the two-wheeler industry is expected for tracking moderate growth in volumes aided by a small starting point, while passenger-vehicle levels would continue to trend upwards, helped by favourable demand drivers."

He said that while demand perceptions in the commercial vehicle sector are stable, volume growth is anticipated to be modest on a sound foundation.

"The impact of an unbalanced monsoon rain on rural demand across segments stays monitorable, even as government initiatives on rural construction of infrastructure, crop procurement etc. remain favorable," Dewan said.

The industry demand is expected to grow at a steady pace due to factors such as rising per capita incomes, changing demographics, low vehicle penetration, favorable policy environments, as well as infrastructure development. ICRA had projected a CAGR of roughly 6–9% across the automotive segments over whatever format to long term.