PV Segment To Grow At 7-9% In FY24
During FY22 and FY23, the PV industry demonstrated substantial year-on-year volume growth, reaching approximately 17.1 per cent and 24.8 per cent, respectively. This growth can be attributed to pent-up demand following the recovery from the Covid-19 pandemic, as well as the introduction of new products in the market. The industry benefitted from lower interest rates and an increased desire for personal mobility in the wake of the pandemic. Supply chain challenges, particularly those related to semiconductor availability, were alleviated, resulting in the highest-ever sales volumes for the industry, surpassing the previous peak in FY19. The growing demand for utility vehicles significantly contributed to the overall volume growth, with utility vehicle volumes increasing by approximately 41.0 per cent in FY22 and 33.2 per cent in FY23. During Q1FY24, PV volumes witnessed a growth of around 2.6 per cent compared to the same period the previous year.
The PV industry is likely to record moderate volume growth of around 7-9 per cent in FY24 as the pent-up demand levels off amid a hike in vehicle prices, high-interest rate environment and subdued exports volume growth on account of a global economic slowdown amid inflationary concerns. Strong order book, improvement in supply chain and semiconductor supplies, robust demand for new model launches and increasing demand in the sports utility vehicle (SUV) segment are expected to keep the sales momentum rolling. The demand for premium variants is expected to remain healthy led by increasing demand for the luxury and premium models, while the demand for entry-level variants is expected to continue to remain under pressure due to high-interest rates and an inflationary environment.
Export Volumes Remain Tepid
During FY22 and FY23, the PV industry reported strong year-on-year export volume growth of around 42.9 per cent and 14.7 per cent respectively post strong volume de-growth of 38.9 per cent in FY21 on account of covid led disruption. The PV industry continues to report lower export volumes, lower than its peak in FY17 on account of the exit of major global automobile manufacturers in the last few years. Despite having a presence in export markets for over three decades Indian PV industry export volumes remain around 15 per cent of its total sale volumes which was around 20 per cent in FY17. The export volumes continue to be driven by global automobile manufacturers. Despite enjoying a strong market share in the domestic markets, the domestic PV players’ export volumes remain subdued. SUV volumes command a 45 per cent share in the domestic market whereas export volumes are equally distributed among SUVs, sedans and hatchbacks. Export volumes are heavily dominated by petrol vehicles. Geopolitical issues and macroeconomic headwinds continue to remain a challenge going forward. The export volumes are expected to remain subdued in FY24.
Utility Vehicles Seeing Strong Demand
The demand remains strong across both passenger cars and utility vehicles. Passenger cars & vans are expected to report moderate growth of 5-7 per cent in FY24 due to a strong base effect and other domestic macro environment factors such as high-interest rate scenario, inflation, and rising vehicle prices due to the cost impact of progressive regulatory norms, while utility vehicles are likely to grow by 9-11 per cent driven by new model launches and increasing demand for SUVs in the domestic market. During FY22 and FY23, utility vehicles reported strong year-on-year volume growth of around 41.0 per cent and 33.2 per cent, respectively, while passenger cars & vans reported growth of around 2.1 per cent and 17.6 per cent, respectively.
Utility vehicles, which contributed 10-15per cent of total passenger vehicle sales volumes until FY12, grew 6.1x between FY13 and FY23, while passenger cars & vans de-grew by 16.9 per cent during the same period as consumer preference shifted towards utility vehicles that offered better and innovative designs, new models, technological, functional and safety features, and customization. For the past decade, the utility vehicles segment has consistently outperformed the PV industry growth rate. Currently, Utility vehicles account for almost 50 per cent of all passenger vehicle sales.
Industry is witnessing a build-up of inventory. Average inventory holding with dealers is expected to reduce from the current 45-49 days in the following months due to expected strong sales momentum in the upcoming festive season beginning August 2023. PV wholesale volume sales grew by 2 per cent y-o-y to 3.27 lakh units in June 2023 while the retail volume grew by 4.79 per cent y-o-y in June 2023 on account of new launches.
With an improving penetration rate, electric vehicle volumes in the PV segment is likely to clock volume around 1 lakh for FY24. Monthly electric car sales have gradually improved in the previous two years from fewer than 1k units to around 8k units and is expected to continue at similar levels. For June 2023, electric car retail sales have recorded y-o-y growth of 97 per cent with volumes at 7687 units as against 3894 units in June 2022.
The PV industry is likely to record moderate volume growth of around 7-9 per cent in FY24 as the pent-up demand levels off amid a hike in vehicle prices, high-interest rate environment and subdued export volume growth owing to the global economic slowdown amid inflationary concerns. “Strong order book, improvement in supply chain and semiconductor supplies, robust demand for new model launches and rising demand in the sports utility vehicle segment is expected to keep the sales momentum rolling,” said Arti Roy, Associate Director of CareEdge View.
The demand for premium variants is expected to remain healthy led by increasing demand for the luxury and premium models, while the demand for entry-level variants is expected to continue to remain under pressure owing to high interest rates and an inflationary environment.
