There is a famous saying that no storm lasts forever. We believe that the worst of the pandemic for the Indian car industry is over, and the worst of supply chain shortage is over.
Penning this article gives me a lot of hope that the Year 2022 can be the year when the Indian car industry reclaims its lost glory. This new year 2022 may not only bring back the momentum the Indian car industry has been missing since the milestone year 2018 but also fulfil the aspirations of many more to own a car which is always a moment of pride for an Indian family. Post pandemic, personal mobility has become the priority as families tend to avoid public and shared means of transportation. It means that in new normal or never normal the fear and the need for personal mobility will act as a catalyst to own the car.
To recall, the Indian light vehicle (Car + LCV < 6 tons) industry peaked in 2018 in India and the market size was 4.1 million units. Since then, the industry has been falling for one or another reason. In 2019 it was the financial debacle, in 2020 it was pandemic, in 2021 it was the chip shortage that derailed the Indian car industry. In the chart below you can see light vehicles sales (car+LCV) sales skidding from 2018 and touching the lowest in 2020. The car industry since then had to live with unutilized capacity and thus struggle with lower profitability.
Today the scenario looks quite positive. The car manufacturers are sitting on the bulk of orders and demand clearly outstrips supply. There has been a waiting period for almost every model and every brand. On new models which have been recently launched, there has been waiting time for even up to 8-10 months. Even the inventory in-network is at its lowest.
Generally, in India, the dealer inventory including transit remains around one to two months. But today the car industry is just sitting on inventory with less than 8 -10 days. This means pent up demand with low inventory levels at the dealer end will undoubtedly support the industry in reaching its milestone which the Indian car industry had touched in 2018.
Now we have better visibility and feel the flywheel of the industry will churn more cars from the conveyor.
There is a famous saying that “No storm lasts forever”. So, we also believe that the worst of the pandemic is over, and the worst of supply chain shortage is over. Now we have better visibility and feel the flywheel of the industry will churn more cars from the conveyor. However, we don’t rule out that on the way there may be a few risks that the industry may have to face.
It may be related to the multiple car price hikes, increase in car prices due to Airbags provision or regulations or hike in repo rates (Interest rates) or increase in fuel prices which may be impacting consumer sentiments. Or it may be related to any mutant of virus which may be fatal or any other bottleneck like shortage of magnesium etc. which may get exposed and impact the supply chain again. Let’s hope the year 2022 brings more cheer and the Indian automotive car industry is back on track and moves towards becoming the third biggest market in the world by 2027.
(Puneet Gupta is the Director, Automotive Sales Forecasting, South Asia Region at IHS Markit. He has been associated with Renault India, Maruti Suzuki and Yamaha.)
(Disclaimer: The views expressed in the article above are those of the authors’ and do not necessarily represent or reflect the views of Autofintechs.com. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.)