India Ratings and Research (Ind-Ra) has published the November 2021 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 28.4% sequential decline in the domestic auto sales volumes (excluding CVs) in November 2021 was on account of a poor demand for entry-level 2Ws and the semiconductor shortage for PVs. The overall production and sales volumes decreased 26% yoy and 32% yoy, respectively, in November 2021.

Domestic PVs sales sequentially dropped 4.7% mom in November 2021 and fell 18.6% yoy, on the account of the semiconductor shortage. This was despite a strong demand in the market, as reflected by low dealership inventory levels of 10-15 days. Domestic PV demand continued its shift towards utility vehicles (UVs), as the segment’s sales grew 1.5% yoy owing to original equipment manufacturers’ (OEMs) prioritisation of UV production over other PV segments. Export sales volume grew 12% mom and 16% yoy.

Domestic 2Ws sales declined 32% mom and 34% yoy in November 2021 owing to the continued poor demand in entry-level segment especially in the rural market, increased cost of ownership on account of price hikes by OEMs and increased fuel prices. 2W export sales declined 4.7% mom while growing 9% yoy.

Domestic 3Ws sales continued to be low owing to a shift in consumer preference towards personal mobility and financing issues. The sales dropped 29.3% mom and 7% yoy in November 2021.

Electric 2W sales volumes were above 1,000 units for continuous six months in November 2021 with average sales during July-November 2021 at 1,204 (November 2021: 1,210, October 2021: 1230, September 2021: 1,408). Ind-Ra believes that new model launches by OEMs in the segment, subsidy offered by the government, as well as higher fuel prices will drive the sales for EVs in the near-to-medium term

In 8MFY22, the overall industry production volumes increased 11% yoy but sales fell by 1% yoy, respectively. While PVs and 3Ws sales were higher by 26% and 36%, 2Ws sales fell by 5% on yoy basis. Exports grew 62% yoy in 8MFY22.

Despite the festive season, retail sales for PVs and 2W fell 19% and 1% yoy owing to the semi-conductor shortage in PVs and the low demand for entry-level 2Ws, respectively; while 3W and CV volumes increased 67% and 13%, respectively. However, retail sales grew on an mom basis across the segments. Inventory at the dealership levels for PVs was stable at 10-15 days in November 2021 (October 2021: 10-15 days, September 2021: 15-20 days). Inventory at 2W dealerships moderately decreased to 30-35 days in November 2021 (October 2021: 40-45 days, September 2021: 30-35 days) on account of increased retail sales by 44% mom and curtailed production owing to the low demand.

In line with Ind-Ra’s expectations, the industry continued to record sequential declines in November 2021. Ind-Ra expects the industry performance to remain affected in December 2021 as well, given the supply-side challenges in the PV segment as well as low consumer demand in 2W segment.

Source: Society of Indian Automobile Manufacturers (SIAM), Federation of Automobile Dealers Associations (FADA) and Ind-Ra

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Analyst Names

  • Prasad Kalikota

    Senior Analyst

    Tej Karan Singh

    Senior Analyst

    Shruti Saboo

    Associate Director
    0124 6687265

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    Ankur Dahiya

    Manager – Corporate Communication
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