Autos See Sequential Recovery in PVs and 2Ws Sales

India Ratings and Research (Ind-Ra) has published the January 2022 edition of its credit news digest on India's auto sector. The report highlights the trends in the sub-segments of the auto sector, including passenger vehicles (PVs) and two/three-wheelers (2W/3Ws), with a focus on sales volumes growth, market share movement, change in commodity prices and recent rating actions.

Ind-Ra believes the 12% month-on-month (mom) improvement in the domestic auto sales volumes (excluding commercial vehicles (CVs)) in January 2022 was due to a lower base in December 2021 and improved production levels across vehicle segments, enabling higher deliveries to dealers. However, the lower rural demand, staggered state-wise restrictions amid the third wave of COVID-19, delaying re-opening schools, colleges and offices, increasing cost of ownership and production constraints in the premium 2W segment 2W (>200cc) and PVs due to the semi-conductor shortage led to domestic sales volume dropping by 19% yoy. Production was 16% year on year (yoy) lower (up 14% mom) in January 2022. Exports were better than domestic sales with a decline of only by 2% yoy.

The PV domestic sales recorded a second month of consecutive sequential growth, increasing 16% mom, in January 2022, supported by improved production levels, while demand remained healthy. Sales growth in the utility vehicle (UV) segment (up 20% mom, 5% yoy) continues to outstrip that in passenger cars (up 12% mom, down17% yoy) with evolving consumer preferences, and has also been catered by original equipment manufacturers (OEMs) through new model launches in the past year. Furthermore, amid the shortage of semi-conductors, OEMs continue to prioritise production of higher-margin UVs over passenger cars. Dealership inventory remained at low levels of 8-10 days amid constrained production. This is also reflected in lower retail sales dropping by 10% yoy (up 6% mom). PV export sales volume also grew 10% yoy, supported by 29% yoy growth in UVs.