The industry is upbeat amid improving component supplies that are helping automakers step up production and clear backlogs faster, and new bookings that continue to be strong ahead of the festive season despite high inflation and increasing interest rates.
Sales of cars, utility vehicles and vans in calendar year 2022 are now expected to be 3.6-3.7 million units, 17-20% higher compared with last year’s sales.
“This will be the best ever year for car sales,” said Vinkesh Gulati, president of the Federation of Automobile Dealers Association, who added that customer demand was still more than supplies. “Every month, whatever we sell, we get 5-10% more bookings which add on to the backlog,” he said. The industry had its best year so far in 2018, with sales of 3.39 million units. These are dispatches from factories and not retail sales, which automakers in India usually do not report.
New Models Generate Interest
Gulati expects retail sales also to be strong this year, as he projects dealerships to hand over at least 3.6 million passenger vehicles to their customers. The strong demand environment is likely to boost factory dispatches in the fiscal year ending March 31, 2023 too to exceed the projection of 3.5-3.7 million units.
Sales of passenger vehicles had been hitting hard at the onset of the pandemic and fell to 2.43 million units in 2020. Demand has since recovered sharply, outpacing supplies and stretching the waiting period for customers, leading vehicle makers to secure multiple sources for parts. A global shortage of semiconductors, a key component in modern vehicles, added to the woes, disrupting operations for the better part of the last year and a half. Sales were 3.08 million units in 2021.
While the supply side is improving, a slew of new launches –
‘s Brezza and Grand Vitara; Hyundai’s Venue and Tucson; the Tata Punch and Mahindra & Mahindra’s XUV700 and Scorpio – is keeping the consumer interest strong. The industry is currently sitting on 700,000-750,000 pending bookings.
“Based on wholesale dispatches, enquiries and pending bookings, demand parameters remain strong,” said Shashank Srivastava, senior executive director at market leader Maruti Suzuki.
The company has an order backlog of 335,000 units. As much as a third of this has come from the newly launched Brezza and the recently unveiled Grand
which together have garnered more than 100,000 bookings in the past few weeks.
With supply bottlenecks easing, Maruti Suzuki has raised production over a year earlier as well as the previous month by 15% in July. Srivastava said: “Production has not been able to keep pace with demand the last 12-18 months. The supply situation is much better now, though unlikely to completely normalise in this quarter.”
Inventory in the channel last month swelled to 212,000 units – the healthiest since August 2021. While pending bookings are large, a big challenge for automakers would now be to make model-wise production in line with the demand pattern. Else, retail will lag wholesale numbers, said Srivastava.
Hardeep Singh Brar, vice-president and head (marketing and sales) at Kia India, said supply-chain issues were now showing signs of easing and that the market sentiment remained bullish. Strong order pipeline, restocking of dealers and resilient consumer demand will boost growth in the industry in the coming months, said Ravi Bhatia, president at consultancy firm Jato Dynamics.