Tepid two-wheeler demand, along with reduced disposable income of entry-level vehicles buyers, are expected to subdue domestic sales volume in FY22 on a year-on-year basis, said India Ratings and Research (Ind-Ra).
Weak demand from the rural sector, as well as deferral of re-opening of colleges and offices amid the third wave of the pandemic are expected to support this trend. Accordingly, Ind-Ra said domestic sales volume is likely to either be flat or decline to the extent of 4 per cent YoY as against its earlier expectation of 12-15 per cent growth.
"This would be exacerbated by lost production amid semi-conductor shortages, particularly, in passenger vehicles (PVs)," it said.
"However, 4QFY22 is likely to be at par or better than 3QFY22 on account of somewhat easing of concerns regarding chip shortages and good harvest income, although it is likely to be offset by dampened consumer sentiments amid the third Covid wave."
It pointed out that while the recovery in the domestic auto industry has been slow, exports have shown healthy growth over '9MFY22' across all industry segments.
"'2Ws', which account for around 80 per cent of total exports, witnessed improved demand from most of the exports markets including Latin America, Asia and Africa and improving share of Indian OEMs across globe.
"Exports increased for PVs and CVs as well. The trend is likely to continue in the remainder of FY22 with sales volume remaining upwards of 50 per cent YoY growth."
In addition, the volume decline for auto OEMs is likely to be somewhat offset by increased average selling price of vehicles. Moreover, auto OEMs are unlikely to be impacted significantly due to their robust balance sheet and strong liquidity position.