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RC Bhargava, Chairman of Maruti Suzuki Ltd, recently shared insights on the growth of the Indian automobile sector, noting that historically, its performance aligned with the country’s GDP. However, a significant deviation occurred in 2019-20. Factors contributing to this shift included the industry’s transition to

BS 6 standards, which incurred additional costs, followed by the disruptive impact of the Covid-19 pandemic. Moreover, a shortage of semiconductors severely impacted automobile production. Despite these challenges, the industry managed to surpass the sales figures of 2019-20 in the fiscal year 2022-23. Bhargava anticipates that automobile sales will maintain the previous year’s levels in the current fiscal year 2023-24.

In 2019, India witnessed the sale of 4.5 million vehicles, experiencing a 3% drop in 2020. However, the industry rebounded with a 30% increase in 2021, reaching 424,037 units sold from April to December. Bhargava projects that overall passenger vehicle sales in 2023-24 will set a record at approximately 4.13 million. Despite this optimistic outlook, the annual sales growth from the highest levels in 2018-19 up to the current year is expected to remain below 4%. However, Bhargava foresees a growth rate of a little over 6% in 2023-24, given the normalization of component availability, particularly semi-conductors, and robust economic growth. The forecast for the next year indicates a growth rate in the range of 6.5 to 7%.

The Society of Indian Automobile Manufacturers (SIAM) reports a decline in small car sales from 5.83 lakh units in FY 2016-17 to 2.52 lakh units in FY 2022-23, a 57% drop. Bhargava expresses concern, emphasizing that the decline in small car sales may impact the entry of new consumers into the higher-priced segments, particularly in the INR 10-15 lakh range. Analysts view the lower sales of small cars and two-wheelers as signs of a lack of broad-based economic recovery, aligning with the ‘K’-shaped recovery concept discussed by economists post-Covid. 

Despite challenges, the EV sector holds significant promise, driven by factors such as the target of achieving zero carbon emissions and the Indian government’s emphasis on EV produc-tion. The government aims for EVs to constitute 30% of new vehicles by 2030. While EVs accounted for only 1.3% of car sales in 2020, stakeholders are actively exploring various measures, including research and development, to boost production. Projections suggest that the domestic EV market could achieve 10 million annual sales by 2030, with optimistic estimates for two-wheelers (40-45%) and passenger vehicles (15-25%). Government support, including direct subsidies under the PLI scheme, exemplified by the Micron semiconductor plant investment, reflects a commitment to promoting EV production in India, despite the substantial associated costs.