Auto Sector of India is all set to grow Double-Digit next Fiscal Year

As per the credit rating agency Crisil, India’s Automobile sector is set to post double-digit growth in the next Fiscal year. This growth will be the result of the country’s better economic conditions and increased personal incomes.

 % growth in the Fiscal year 2020-2021  Expected % growth in the fiscal year 2021-2022
Passenger Vehicles3-5%23-25%
Commercial Vehicles19-21%34-36%

Reasons for growth of Auto Sector in India:

Auto Sector in India
  1. the restoration of salary cuts in the first quarter of the fiscal year by the manufacturing sector. The IT sector even offers raises[Crisil Research]
  2. The Urban customers comprise 65% of passenger vehicle sales, 40% of two-wheeler sales are more drawn to purchase.
  3. The cost of acquisition of Private vehicles and two-wheelers includes insurance, registration, down payment, ex-showroom price in the upcoming fiscal year will be moderate(3-4%) compared with an 8-11% rise in fiscals 2020 and 2021.
  4. New models will be launched and demand will rise as a result of the quest for safe personal transport.
  5. The road infrastructure is expected to be developed by the next fiscal year for improving economic activities. This will result in increased demand for commercial vehicles.
  6. With gradual unlock, schools and offices will start to reopen. This will support demand for public transport and light commercial vehicles.
  7. The commercial vehicle segment depends on financing. Financiers lowered loan to value after the pandemic squeezed the cash flow of operators.

Crisil also pointed out that there has been tremendous growth in sales volume of all three sectors and sales volume will surpass pre-covid levels. The recovery will be even sharper in the next fiscal year.

The increasing cost of Original Equipment manufacturing will be offset by higher sales volume and price hike, maintaining the operating margins almost the same as 2019.

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