Indian Automobile Industry To Witness Moderate Growth In FY24, Experts Remain Cautious About Monsoon Affected Rural Demand: ICRA

ICRA said the industry has been recovering steadily, helped by an upturn in economic activities and enhanced mobility, but the speed of this comeback has been ‘somewhat mixed' across segments.

Volume growth in the commercial vehicle industry is expected to remain on the lower end on a healthy base, despite a steady demand environment.

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The Indian domestic automobile industry is estimated to report moderate growth in volumes in the current fiscal year, rating agency ICRA said on Tuesday. The agency, however, cautioned that a recovery in demand sentiments still poses a question as worries about the effect of an uneven monsoon on rural demand persist. 

In a statement, the ratings agency revealed that the automobile industry in India has been on the path of a recovery for the last two years, helped by an upturn in economic activities and enhanced mobility, but the pace of this comeback across the various segments of the industry has been ‘somewhat mixed’, reported PTI.

Tracking Growth Across Segments

The report noted that in the previous fiscal year, the passenger vehicle segment logged a record all-time high volume levels, helped by the preference for personal mobility and stable semiconductor supplies. The demand mood is further expected to remain on the positive side in the sector with a growth rate of 6 to 9 per cent on a year-on-year (YoY) basis in FY24. 

The commercial vehicle industry has also followed similar path as the overall industry volumes are projected to reach the pre-pandemic high levels, even as growth is expected to remain at modest levels of 2 to 4 per cent YoY. The segment reported strong boost in volumes in FY23, the agency said.

On the other hand, the two-wheeler segment in the industry has been struggling as the volumes remain below the previous highs of the pre-pandemic era. ICRA’s senior vice president and group head - corporate ratings, Shamsher Dewan, said, “We expect growth across the automotive industry segments to remain at moderate levels in FY2024. While the passenger vehicle volumes would continue to trend upwards, aided by favourable demand drivers, the two-wheeler industry is also expected to record moderate growth in volumes aided by a low base.”

Dewan further noted that volume growth in the commercial vehicle industry is expected to remain on the lower end on a healthy base, despite a steady demand environment. “The impact of an uneven monsoon precipitation on rural demand across segments remains monitorable, even as the government's efforts on rural infrastructure development, crop procurement etc. remain positive,” he added.