India’s carmakers, despite niggling chip shortages, are proving this year that there’s much more than a grain of truth in that age-old saying.
Last year was a washout and car sales slumped to levels not seen in a decade. But 2021 has been stellar by all yardsticks so far: The passenger vehicle market has already posted its second highest sales in a decade through August in 2021.
And that isn’t all: This calendar year may turn out to be the second best in a decade!
With sustained demand and expectations of improving chip supplies, Jato Dynamics expects the Indian passenger vehicle market to end 2021 with volumes of 3.34 million units – the second highest in a decade and merely about 50,000 lower than the peak.
Sales charts would have gleamed even more had Covid 2 not come in the way.
Global forecasting firm IHS Markit expects India to overtake Germany as the fourth largest light vehicle maker in the world in 2021.
So far this calendar year, volumes have climbed over 70% to 2.13 million units, which is the highest growth rate in a decade. Vehicle makers produced 58% more than last year, against the highest in absolute terms at 2.29 million units.
Low base of last year, need for personal mobility and spike in demand for SUVs have led to a swift rebound.
Vehicle makers have posted sales of over 3 lakh units per month this calendar year, and despite the second wave of Covid-19, the revival has been so quick that dealer inventory has been among the lowest. For some, inventory is only for days as against weeks.
Ravi Bhatia, president for JATO Dynamics India, told ET that sales this year are running close to the best in a decade and the market is expected to close at 3.34 million units.
The India middle class pool of 121 million households with an income of 75,000-150,000 clearly wanted to get back to work and they need personal mobility, which is clearly reflected in the numbers.
*Source : Jato Dynamics India“If vaccinations proceed and we have no severe third wave, then it could be close to one of the best. What stands out is the resilience of demand. Also, dealers have done this with lower inventory, lower incentives and higher prices,” added Bhatia.
One of the factors hurting output recently has been the disruption in manufacturing in Malaysia due to rising Covid cases. However, the situation is gradually improving and that may help the India market secure better supplies than in the recent months. Vehicle makers on their part have adapted to the chip shortage with special trims.
Bhatia says Malaysia has 13% of the world’s automotive testing and packaging capacity and that the testing and packaging capacity is almost back up, boosting supplies in the coming months.
Experts believe that if not for chip shortages, the market could have crossed its peak. Over a dozen models have a waiting period for more than 8 weeks. The industry still faces pending bookings of more than 4 lakh units and the numbers are swelling, with several more high-profile launches – of Mahindra XUV 700, Tata Punch, M G Astor and Citroen C3, for instance – coming up.
|India LVP||3.9 million|
|Germany LVP||3 .43 million|
*Source : IHS Markit
Gaurav Vangaal, associate director at IHS Markit, says strong demand, low semiconductor content, better product mix and proactive management have cushioned the impact of chip shortage.
“We project India to surpass Germany in 2021 to become the fourth largest manufacturing base for Light Vehicle Production. However, Germany might regain its position once the supply scenario improves. Demand is indeed very strong; however, the recent disruption in supply scenario is a cause of concern and it is likely to continue. How vehicle makers manage this disruption will determine the final numbers,” added Vangaal.