Ind-Ra revises its FY2023 automotive sector outlook to Neutral.

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India Ratings and Research revised its outlook for the auto sector to neutral for 202223 from “improve”, saying that supply-side constraints and subdued rural demand will limit growth.

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  • Last updated:March 09, 2022 5:14 PM IST
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India Ratings and Research (Ind-Ra) on Tuesday revised its outlook for the auto sector to “neutral” for 2022-23 from “improving”, saying supply-side constraints and subdued rural demand will limit growth. Domestic automobile sales volume is expected to grow 5-9 percent year on year in 2022-23 after three years of decline, and is expected to decline 5-8 percent in 2021-22, the rating agency said in a statement.

In the next fiscal year, passenger car volumes could grow 5 to 9 percent, driven by a temporary improvement in consumer sentiment and the continued preference for personal mobility, although supply chain issues could limit growth. In 2021-22 it is likely to grow by 8-12 percent. “The semiconductor chip shortage may continue and gradually improve in the next few quarters,” said Ind-Ra.

Increased operating costs, a slower rebound in spending power by low-end consumers and subdued rural demand could limit two-wheeler growth to 5 to 8 percent for the next fiscal year, it said, adding that 2021-22 is expected to be around 10 -13 percent decrease. Regarding commercial vehicles (CVs), the rating agency said volumes are expected to grow 16-22 percent in 2022-23, compared to 20-24 percent this fiscal year, mainly supported by medium and heavy CVs, supported by a Increase in economic activity and increased infrastructure spending.

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Ind-Ra said the ongoing geopolitical tensions amid the Russia-Ukraine situation could push up commodity and crude oil prices and exacerbate supply chain problems. “In addition, a slower recovery in rural sales and further price hikes by OEMs could act as possible headwinds for the sector,” he added.

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