Passenger vehicle demand to witness moderate growth over next few quarters: Report

The demand for passenger vehicles (PVs) will witness moderate growth over the next few quarters with complete unlocking of the economy and revival of demand, particularly in the rural areas, according to Acuite Ratings & Research. However, it said the volumes may remain partly constrained due to the continuing supply challenges in semiconductors and also the sharp increase in retail fuel prices.

The domestic PV sales registered a healthy growth of 14.7 percent year-on-year in FY22 despite the supply challenges in semiconductors that led to longer waiting periods and production cuts for certain models, Acuite said in a statement. The growth print was also supported by a low base factor, given the protracted lockdown in FY21, it added.

"Acuite believes that the demand for PVs will witness a moderate growth over the next few quarters with complete unlocking of the economy and revival of demand, particularly in the rural areas," it said.

For two-wheelers, the rating agency said the demand in India has continued to be plagued by the prolonged COVID pandemic and its impact on the informal sector and small businesses. "While we expect demand to make a comeback in FY23 due to unlocking of the economy and the expectation of healthy agricultural output, the timeframe for the same is uncertain and may also be impacted by the sharply rising retail fuel prices," it added.

In the commercial vehicles (CV) segment, Acuite said domestic sales registered a year-on-year growth of 25.2 percent in FY22. It was mainly on account of the recovery witnessed in demand during the second half of the fiscal, led by a revival in industrial activity, pickup in trade volumes and increased public investments in infrastructure despite the bouts of the COVID pandemic.

"The improvement in the demand of CVs will continue going ahead with the unlocking of the economy and the government's focus towards development of infrastructure and expansion of National Highways in the country," Acuite Ratings & Research Ltd Chief Analytical Officer Suman Chowdhury said.

However, Chowdhury said, the sharp rise in retail fuel prices due to the current geo-political scenario will put pressure on transporters' margins and may impact the purchase of new vehicles in the near term.