India Ratings and Research (Ind-Ra) on Tuesday revised its outlook for the auto sector to 'neutral' from 'improving' for 2022-23, saying supply-side constraints and a muted rural demand will restrict growth.
Domestic automobile sales volume is expected to grow 5-9 per cent year-on-year in 2022-23, after three consecutive years of decline, and is likely to fall 5-8 per cent in 2021-22, the ratings agency said in a statement.
In the next fiscal year, passenger vehicle volume could grow 5-9 per cent driven by an intermittent improvement in consumer sentiments and continued preference for personal mobility, although supply chain issues could limit the growth. In 2021-22, it is likely to grow 8-12 per cent.
"Semiconductor chip shortages could persist for the next few quarters while improving gradually," Ind-Ra said.
Increased cost of ownership, a slower revival in the purchasing power of lower-end consumers and a muted rural demand could limit two-wheelers growth at 5-8 per cent for next fiscal year, it said, adding in 2021-22 it is expected to decline 10-13 per cent.
As for commercial vehicles(CVs), the ratings agency said volumes are likely to grow 16-22 per cent in 2022-23 as compared to 20-24 per cent in this fiscal year, mainly supported by medium and heavy CVs, aided by an uptick in economic activities and increased infrastructure spending.
Ind-Ra said the ongoing geopolitical tensions amid Russia-Ukraine situation could increase commodity prices, crude oil prices, and exacerbate supply chain issues.
"Furthermore, a slower recovery in rural sales and further price hikes by original equipment manufacturers could act as possible headwinds for the sector," it added.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)
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