India - Passenger Vehicle Industry - November 2023

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India – Passenger Vehicle

Industry
November 2023
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India – Passenger Vehicle Industry
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Table of Contents
1. Economic Outlook .....................................................................................................................................5
1.1 Global Economy .............................................................................................................................................. 5
1.2 Indian Economic Outlook ................................................................................................................................. 7
1.2.1 GDP Growth and Outlook .............................................................................................................................. 7
1.2.2 Gross Value Added (GVA) .............................................................................................................................. 7
1.2.3 Investment Trend in Infrastructure .............................................................................................................. 10
1.2.4 Industrial Growth........................................................................................................................................ 11
1.2.5 Consumer Price Index ................................................................................................................................. 11
1.2.6 Concluding Remarks ................................................................................................................................... 13
2. Overview of Indian Automobile Industry .............................................................................................. 14
2.1 Overview ...................................................................................................................................................... 14
2.2 Automobile Industry Segment Wise Performance ............................................................................................ 15
1.2.7 Two Wheelers ............................................................................................................................................ 15
1.2.8 Passenger Vehicles ..................................................................................................................................... 15
1.2.9 Commercial Vehicles ................................................................................................................................... 16
1.2.10 Three Wheelers ........................................................................................................................................ 16
2.3 Automobile Industry Performance in FY23 and Outlook .................................................................................... 17
3. Indian Passenger Vehicle Industry ........................................................................................................ 18
3.1 Overview ...................................................................................................................................................... 18
3.2 Segment Wise Performance ........................................................................................................................... 19
3.3 Key players in PV industry .............................................................................................................................. 20
3.4 Profitability and Margins ................................................................................................................................. 21
4. Electric Four-Wheeler Industry .............................................................................................................. 23
4.1 Overview of Electric Vehicle Industry .............................................................................................................. 23
4.2 Electric Four-Wheeler Industry in India ........................................................................................................... 24
4.3 Top four-wheeler EV Manufacturers in India.................................................................................................... 24
4.4 Outlook on E4W Industry ............................................................................................................................... 25
5. Key Government Initiatives ................................................................................................................... 27
6. Demand Drivers of Passenger Vehicle Industry .................................................................................... 28
7. Challenges faced by Indian Passenger Vehicle Industry ....................................................................... 29
8. Outlook - Stable ..................................................................................................................................... 31

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List of Tables
Table 1: GDP growth trend comparison - India v/s Other Economies (Real GDP, Y-o-Y change in %) ........................... 5
Table 2: RBI's GDP Growth Outlook (Y-o-Y %) .......................................................................................................... 7
Table 3: Sectoral Growth (Y-o-Y % Growth) - at Constant Prices ................................................................................ 9
Table 4:Market Trends of two-wheelers in India ...................................................................................................... 15
Table 5: Market Trends of passenger vehicles in India ............................................................................................. 16
Table 6: Market Trends of commercial vehicles in India ............................................................................................ 16
Table 7: Market Trends of three-wheelers in India ................................................................................................... 16
Table 8: Electric Vehicle Sales in India .................................................................................................................... 23
List of Charts
Chart 1: Global Growth Outlook Projections (Real GDP, Y-o-Y change in %) ................................................................ 5
Chart 2: Growth in Per Capita GDP, Income and Final Consumption (Y-o-Y growth in %) ........................................... 10
Chart 3: Gross Fixed Capital Formation (GFCF) as % of GDP (At constant prices): .................................................... 10
Chart 4: Y-o-Y growth in IIP (in %) ........................................................................................................................ 11
Chart 5: Retail Price Inflation in terms of index and Y-o-Y Growth in % (Base: 2011-12=100) .................................... 12
Chart 6: RBI historical Repo Rate ............................................................................................................................ 12
Chart 7: Domestic Sales and Export of Automobiles in India ..................................................................................... 14
Chart 8:Share of different categories in automobile domestic sales ........................................................................... 15
Chart 9: Trend in Indian Automobile Industry Domestic Sales Growth ....................................................................... 17
Chart 10 : Historical Trend of Domestic Sales and Exports of Passenger Vehicle Industry in India ............................... 18
Chart 11: Trend of domestic sales share of various PV segments .............................................................................. 19
Chart 12: - Market Share of key PV players in FY23 ................................................................................................ 20
Chart 13: Crude Oil (Brent) Price ............................................................................................................................ 21
Chart 14: Price of Natural Rubber (RSS 4) * ............................................................................................................ 21
Chart 15: Steel Price Trend .................................................................................................................................... 22
Chart 16: Aluminium Price Trend ............................................................................................................................ 22
Chart 17: Overall EV Sales Penetration in India ........................................................................................................ 23
Chart 18: Electric Four-Wheeler Sales and E4W Penetration in India ......................................................................... 24

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1. Economic Outlook
1.1 Global Economy

As per the International Monetary Fund (IMF)’s World Economic Outlook growth projections released in October 2023,
the global economic growth for CY221 stood at 3.5% on a year-on-year (y-o-y) basis, down from 6.3% in CY21 due to
disruptions resulting from the Russia-Ukraine conflict and higher-than-expected inflation worldwide. On the other hand,
the global economic growth for CY23 is projected to slow down further to 3.0% and 2.9% in CY24, attributed to
compressing global financial conditions, expectant steeper interest rate hikes by major central banks to fight inflation,
and spill-over effects from the Russia-Ukraine conflict, with gas supplies from Russia to Europe expected to remain
tightened. For the next 4 years, the IMF projects world economic growth in the range of 3.0%-3.2% on a y-o-y basis.
Chart 1: Global Growth Outlook Projections (Real GDP, Y-o-Y change in %)
8.0%
6.0%
GDP growth (Y-o-Y %)
4.0%
2.0%
0.0%
CY18 CY19 CY20 CY21 CY22 CY23P CY24P CY25P CY26P CY27P CY28P
-2.0%
-4.0%
-6.0%
World Advanced Economies Emerging Market and Developing Economies
Notes: P-Projection;
Source: IMF – World Economic Outlook, October 2023
Table 1: GDP growth trend comparison - India v/s Other Economies (Real GDP, Y-o-Y change in %)
Real GDP (Y-o-Y change in %)

CY19 CY20 CY21 CY22 CY23P CY24P CY25P CY26P CY27P CY28P
India 3.9 -5.8 9.1 7.2 6.3 6.3 6.3 6.3 6.3 6.3
China 6.0 2.2 8.5 3.0 5.0 4.2 4.1 4.1 3.7 3.4
Indonesia 5.0 -2.1 3.7 5.3 5.0 5.0 5.0 5.0 5.0 5.0
Saudi Arabia 0.8 -4.3 3.9 8.7 0.8 4.0 4.2 3.3 3.3 3.1
Brazil 1.2 -3.3 5.0 2.9 3.1 1.5 1.9 1.9 2.0 2.0
Euro Area 1.6 -6.1 5.6 3.3 0.7 1.2 1.8 1.7 1.5 1.3
United States 2.3 -2.8 5.9 2.1 2.1 1.5 1.8 2.1 2.1 2.1
P- Projections; Source: IMF- World Economic Outlook Database (October 2023)
Advanced Economies Group

The major advanced economies registered GDP growth of 2.6% in CY22, down from 5.6% in CY21, which is further
projected to decline to 1.5% in CY23. This forecast of low growth reflects increased central bank interest rates to fight
inflation and the impact of the Russia-Ukraine war. About 90% of advanced economies are projected to witness decline
GDP growth in CY23 compared to CY22. In addition, this is further expected to decline to 1.4% in CY24.
1 CY – Calendar Year

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One of the major countries from this group is the United States. The United States registered GDP growth of 2.1% in
CY22 compared to 5.9% in CY21. Whereas, growth for CY23 and CY24 is projected at 2.1% and 1.5%, respectively.
Among advanced economies group, private consumption has been stronger in the United States than in the euro area.
The business investments have also been robust in the second quarter, in addition, the general government fiscal stance
of United States is expected to be expansionary in CY23. However, the unemployment rate is expected to rise coupled
with declining wages and savings. With this, the GDP growth is expected to soften in near term.
Further, the Euro Area registered GDP growth of 3.3% in CY22 compared to 5.6% in CY21. For CY23 and CY24, the
growth is projected at 0.7% and 1.2%, respectively. There is divergence in GDP growth across the euro area. Wherein,
Germany is expected to witnesses slight contraction in growth due to weak interest rate sensitive sector and slow trading
demand. On the other hand, the GDP growth for France has been revised upwards on account of growing industrial
production and external demand.
Emerging Market and Developing Economies Group
For the emerging market and developing economies group, GDP growth stood at 4.1% in CY22, compared to 6.9% in
CY21. This growth is further projected at 4.0% in CY23 and CY24. About 90% of the emerging economies are projected
to make positive growth. While the remaining economies, including the low-income countries, are expected to progress
slower.
Further, in China, growth is expected to pick up to 5.0% with the full reopening in CY23 and subsequently moderate in
CY24 to 4.2%. The property market crisis and lower investment are key factors leading to this moderation. Whereas,
India is projected to remain strong at 6.3% for both CY23 and CY24 backed by resilient domestic demands despite
external headwinds.
The Indonesian economy is expected to register growth of 5% both in CY23 and CY24 with a strong recovery in domestic
demands, a healthy export performance, policy measures, and normalization in commodity prices. In CY22, Saudi Arabia
was the fastest-growing economy in this peer set with 8.7% growth. The growth is accredited to robust oil production,
non-oil private investments encompassing wholesale and retail trade, construction and transport, and surging private
consumption. Saudi Arabia is expected to grow at 0.8% and 4.0% in CY23 and CY24, respectively. On the other hand,
Brazil is expected to project growth of 3.1% in CY23 driven by buoyant agriculture and resilient services in the first half
of CY23.
Despite the turmoil in the last 2-3 years, India bears good tidings to become a USD 5 trillion economy by CY27. According
to the IMF dataset on Gross Domestic Product (GDP) at current prices, the GDP has been estimated to be at USD 3.4
trillion for CY22 and is projected to reach USD 5.2 trillion by CY27. India’s expected GDP growth rate for coming years is
almost double compared to the world economy.
Besides, India stands out as the fastest-growing economy among the major economies. The country is expected to grow
at more than 6% in the period of CY24-CY28, outshining China’s growth rate. By CY27, the Indian economy is estimated
to emerge as the third-largest economy globally, hopping over Japan and Germany. Currently, it is the third-largest
economy globally in terms of Purchasing Power Parity (PPP) with a ~7% share in the global economy, with China [~18%]
on the top followed by the United States [~15%]. Purchasing Power Parity is an economic performance indicator denoting
the relative price of an average basket of goods and services that a household needs for livelihood in each country.
Despite Covid-19’s impact, high inflationary and interest rates globally, and the geopolitical tensions in Europe, India has
been a major contributor to world economic growth. India is increasingly becoming an open economy as well through
growing foreign trade. Despite the global inflation and uncertainties, Indian economy continues to show resilience. This
resilience is mainly supported stable financial sector backed by well-capitalized banks and export of services in trade
balance. With this, the growth of Indian economy is expected to fare better than other economies majorly on account of

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strong investment activity bolstered by the government’s capex push and buoyant private consumption, particularly
among higher income earners.
1.2 Indian Economic Outlook
1.2.1 GDP Growth and Outlook
Resilience to External Shocks remains Critical for Near-Term Outlook

India’s GDP grew by 9.1% in FY22 and stood at Rs. 149.3 trillion despite the pandemic and geopolitical Russia-Ukraine
spillovers. In Q1FY23, India recorded 13.2% y-o-y growth in GDP, largely attributed to improved performance by the
agriculture and services sectors. Following this double-digit growth, Q2FY23 witnessed 6.3% y-o-y growth, while Q3FY23
registered 4.5% y-o-y growth. The slowdown during Q2FY23 and Q3FY23 compared to Q1FY23 can be attributed to the
normalization of the base and a contraction in the manufacturing sector’s output.
Subsequently, Q4FY23 registered broad-based improvement across sectors compared to Q3FY23 with a growth of 6.1%
y-o-y. The investments, as announced in the Union Budget 2022-23 on boosting public infrastructure through enhanced
capital expenditure, have augmented growth and encouraged private investment through large multiplier effects in FY23.
Supported by fixed investment and higher net exports, GDP for full-year FY23 was valued at Rs. 160.1 trillion registering
an increase of 7.2% y-o-y.
Furthermore, in Q1FY24, the economic growth accelerated to 7.8%. The manufacturing sector maintained an encouraging
pace of growth, given the favorable demand conditions and lower input prices. The growth was supplemented by a
supportive base alongside robust services and construction activities.
GDP Growth Outlook
• During FY24, strong agricultural and allied activity prospects are likely to boost rural demands. However, a rebound
in contact-intensive sectors and discretionary spending is expected to support urban consumption.
• Strong credit growth, resilient financial markets, and the government’s continual push for capital spending and
infrastructure are likely to create a compatible environment for investments.
• External demand is likely to remain subdued with a slowdown in global activities, thereby indicating adverse
implications for exports. Additionally, heightened inflationary pressures and resultant policy tightening may pose a
risk to the growth potential.
Taking all these factors into consideration, in October 2023, the RBI in its bi-monthly monetary policy meeting estimated
a real GDP growth of 6.5% y-o-y for FY24.
Table 2: RBI's GDP Growth Outlook (Y-o-Y %)
FY24
(complete Q2FY24 Q3FY24 Q4FY24 Q1FY25
year)
6.5 6.5 6.0 5.7 6.6%
Source: Reserve Bank of India
1.2.2 Gross Value Added (GVA)

Gross Value Added (GVA) is the measure of the value of goods and services produced in an economy. GVA gives a picture
of the supply side whereas GDP represents consumption.
Industry and Services sector leading the recovery charge

7
• The gap between GDP and GVA growth turned positive in FY22 (after a gap of two years) due to robust tax collections.
Of the three major sector heads, the service sector has been the fastest-growing sector in the last 5 years.
• The agriculture sector was holding growth momentum till FY18. In FY19, the acreage for the rabi crop was marginally
lower than the previous year which affected the agricultural performance. Whereas FY20 witnessed growth on account
of improved production. During the pandemic-impacted period of FY21, the agriculture sector was largely insulated as
timely and proactive exemptions from COVID-induced lockdowns to the sector facilitated uninterrupted harvesting of rabi
crops and sowing of kharif crops. However, supply chain disruptions impacted the flow of agricultural goods leading to
high food inflation and adverse initial impact on some major agricultural exports. However, performance remained steady
in FY22.
Further, in Q1FY23 and Q2FY23, the agriculture sector recorded a growth of 2.4% and 2.5%, respectively, on a y-o-y
basis. Due to uneven rains in the financial year, the production of some major Kharif crops, such as rice and pulses, was
adversely impacted thereby impacting the agriculture sector’s output. In Q3FY23 and Q4FY23, the sector recorded a
growth of 4.7% and 5.5%, respectively, on a y-o-y basis.
Overall, the agriculture sector performed well despite weather-related disruptions, such as uneven monsoon and
unseasonal rainfall, impacting yields of some major crops and clocked a growth of 4% y-o-y in FY23, garnering Rs. 22.3
trillion. In Q1FY24, this sector expanded at a slower pace of 3.1% compared to a quarter ago. Going forward, rising bank
credit to the sector and increased exports will be the drivers for the agriculture sector. However, a deficient rainfall may
impact the reservoir level weighing on prospects of rabi sowing. A downside risk exists in case the intensity of El Nino is
significantly strong.
• The industrial sector witnessed a CAGR of 4.7% for the period FY16 to FY19. From March 2020 onwards, the
nationwide lockdown due to the pandemic significantly impacted industrial activities. In FY20 and FY21, this sector felt
turbulence due to the pandemic and recorded a decline of 1.4% and 0.9%, respectively, on a y-o-y basis. With the
opening up of the economy and resumption of industrial activities, it registered 11.6% y-o-y growth in FY22, albeit on a
lower base.
The industrial output in Q1FY23 jumped 9.4% on a y-o-y basis. However, in the subsequent quarter, the sector witnessed
a sharp contraction of 0.5% due to lower output across the mining, manufacturing, and construction sectors. This was
mainly because of the poor performance of the manufacturing sector, which was marred by high input costs. In Q3FY23,
the sector grew modestly by 2.3% y-o-y. The growth picked up in Q4FY23 to 6.3% y-o-y owing to a rebound in
manufacturing activities and healthy growth in the construction sector. Overall, the industrial sector is estimated to be
valued at Rs. 45.2 trillion registering 4.4% growth in FY23.
The industrial sector grew by 5.5% in Q1FY24. The industrial growth was mainly supported by sustained momentum in
the manufacturing and construction sectors. Within manufacturing (as captured by IIP numbers), industries such as
pharma, non-metallic mineral products, rubber, plastic, metals, etc., witnessed higher production growth during the
quarter.
• The services sector recorded a CAGR of 7.1% for the period FY16 to FY20, which was led by trade, hotels, transport,
communication, and services related to broadcasting, finance, real estate, and professional services. This sector was the
hardest hit by the pandemic and registered an 8.2% y-o-y decline in FY21. The easing of restrictions aided a fast rebound
in this sector, with 8.8% y-o-y growth witnessed in FY22.
In Q1FY23 and Q2FY23, this sector registered a y-o-y growth of 16.3% and 9.4%, respectively, on a lower base and
supported by a revival in contact-intensive industries. Further, the services sector continued to witness buoyant demand
and recorded a growth of 6.1% y-o-y in Q3FY23. Supported by robust discretionary demands, Q4FY23 registered 6.9%
growth largely driven by the trade, hotel, and transportation industries. Overall, benefitting from the pent-up demand,
the service sector was valued at Rs. 20.6 trillion and registered growth of 9.5% y-o-y in FY23.

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Whereas in Q1FY24, the services sector growth jumped to 10.3%. Within services, there was a broad-based improvement
in growth across different sub-sectors. However, the sharpest jump was seen in financial, real estate, and professional
services. Trade, hotels, and transport sub-sectors expanded at a healthy pace gaining from strength in discretionary
demand. Accordingly, steady growth in various service sector indicators like air passenger traffic, port cargo traffic, GST
collections, and retail credit are expected to support the services sector.
Table 3: Sectoral Growth (Y-o-Y % Growth) - at Constant Prices
FY20 FY21 FY22 FY23

At constant Prices FY18 FY19 Q1FY23 Q1FY24
(3RE) (2RE) (1RE) (PE)
Agriculture, Forestry & Fishing 6.6 2.1 6.2 4.1 3.5 4 2.4 3.5
Industry 5.9 5.3 -1.4 -0.9 11.6 4.4 9.4 5.5
Mining & Quarrying -5.6 -0.8 -3 -8.6 7.1 4.6 9.5 5.8
Manufacturing 7.5 5.4 -3 2.9 11.1 1.3 6.1 4.7
Electricity, Gas, Water Supply &
10.6 7.9 2.3 -4.3 9.9 9 14.9 2.9
Other Utility Services
Construction 5.2 6.5 1.6 -5.7 14.8 10 16 7.9
Services 6.3 7.2 6.4 -8.2 8.8 9.5 9.4 10.3
Trade, Hotels, Transport,
10.3 7.2 6 -19.7 13.8 14 25.7 9.2
Communication & Broadcasting
Financial, Real Estate &
1.8 7 6.8 2.1 4.7 7.1 8.5 12.2
Professional Services
Public Administration, Defence and
8.3 7.5 6.6 -7.6 9.7 7.2 21.3 7.9
Other Services
GVA at Basic Price 6.2 5.8 3.9 -4.2 8.8 7 11.9 7.8
Note: 3RE – Third Revised Estimate, 2RE – Second Revised Estimates, 1RE – First Revised Estimates, PE – Provisional Estimate; Source:
MOSPI
Per capita GDP, Per Capita GNI and Per Capita PFCE
India has a population of about 1.3 billion with a young demographic profile. The advantages associated with this
demographic dividend are better economic growth, rapid industrialization and urbanization.
Gross Domestic Product (GDP) per capita is a measure of a country’s economic output per person. FY21 witnessea
significant de-growth due to the pandemic. However, in FY22 the economy paved its way towards recovery and the per
capita GDP grew by 8.0%. This growth was moderated to 6.1% due to the correction of base effect in FY23. The Gross
national income (GNI) also increased by 7.3% in FY22 and 6.2% in FY23. The per capita private final consumption
expenditure (PFCE), which represents consumer spending, increased by 10.2% in FY22 and 6.4% in FY23.

9
Chart 2: Growth in Per Capita GDP, Income and Final Consumption (Y-o-Y growth in %)
12.0 10.2
10.0 8.0
7.3
8.0 6.1 6.2 6.0 6.4
5.4 5.4
6.0
Y-o-Y growth in %
4.1
4.0 2.8 2.9
2.0
0.0
-2.0
-4.0
-6.0
-8.0 -6.8 -6.2
-7.2
-10.0
Per capita GDP Per capita GNI Per capita PFCE
FY19 FY20 [3RE] FY21 [2RE] FY22 [1RE] FY23 [PE]
MOSPI
1.2.3 Investment Trend in Infrastructure

Gross Fixed Capital Formation (GFCF), which is a measure of the net increase in physical assets, witnessed an
improvement in FY22. As a proportion of GDP, it is estimated to be at 32.7%, which is the second-highest level in 7 years
(since FY15). In FY23, the ratio of investment (GFCE) to GDP climbed up to its highest in the last decade at 34%, as per
the advanced estimate released by the Ministry of Statistics and Programme Implementation (MOSPI).
Chart 3: Gross Fixed Capital Formation (GFCF) as % of GDP (At constant prices):
34.0
GFCF as % of GDP
32.7
32.4
31.1 31.1
30.7 30.8 30.8
FY16 FY17 FY18 FY19 FY20 [3RE] FY21 FY22 [1RE] FY23 [PE]
[2RE]
MOSPI
Overall, the support of public investment in infrastructure is likely to gain traction due to initiatives such as Atmanirbhar
Bharat, Make in India, and Production-linked Incentive (PLI) scheme announced across various sectors.

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1.2.4 Industrial Growth
Improved Core and Capital Goods Sectors helped IIP Growth Momentum
The Index of Industrial Production (IIP) is an index to track manufacturing activity in an economy. On a cumulative basis,
IIP grew by 11.4% y-o-y in FY22 post declining by 0.8% y-o-y and 8.4% y-o-y, respectively, in FY20 and FY21. This high
growth was mainly backed by a low base of FY21. FY22 IIP was higher by 2.0% when compared with the pre-pandemic
level of FY20, indicating that while economic recovery was underway, it was still at very nascent stages.
During FY23, the industrial output recorded a growth of 5.1% y-o-y supported by a favorable base and a rebound in
economic activities. The period April 2023 – September 2023, industrial output grew by 6.1% compared to the 7% growth
in the corresponding period last year. So far in the current fiscal, while the infrastructure-related sectors have been doing
well, slowing global growth and downside risks to rural demand have posed a challenge for industrial activity. Though the
continued moderation in inflationary pressure offers some comfort, pain points in the form of elevated prices of select
food items continue to persist.
Chart 4: Y-o-Y growth in IIP (in %)
11.4
Y-o-Y growth in IIP (in %)
7.1
6.0
4.6 5.1
4.0 4.4 3.8
3.3 3.3
-0.8
FY21
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY22
FY23
Apr'22-Sep'22
Apr'23-Sep'23
-8.4
Source: MOSPI
1.2.5 Consumer Price Index

India’s consumer price index (CPI), which tracks retail price inflation, stood at an average of 5.5% in FY22 which was
within RBI’s targeted tolerance band of 6%. However, consumer inflation started to upswing from October 2021 onwards
and reached a tolerance level of 6% in January 2022. Following this, CPI reached 6.9% in March 2022.
CPI remained elevated at an average of 6.7% in FY23, above the RBI’s tolerance level. However, there was some respite
toward the end of the fiscal wherein the retail inflation stood at 5.7% in March 2023, tracing back to the RBI’s tolerance
band. Apart from a favorable base effect, the relief in retail inflation came from a moderation in food inflation.
In the current fiscal FY24, the CPI moderated for two consecutive months to 4.7% in April 2023 and 4.3% in May 2023.
This trend snapped in June 2023 with CPI rising to 4.9%. In July 2023, the CPI had reached the RBI’s target range for
the first time since February 2023 at 7.4% largely due to increased food inflation. This marked the highest reading
observed since the peak in April 2022 at 7.8%. The notable surge in vegetable prices and elevated inflation in other food
categories such as cereals, pulses, spices, and milk have driven this increase. Further, the contribution of food and
beverage to the overall inflation had risen significantly to 65%, surpassing their weight in the CPI basket. In August 2023,

11
the food inflation witnessed some moderation owing to government’s active intervention. This was further moderated for
second consecutive month in September 2023 by 5% helped by a sharp correction in vegetables prices and lower LPG
prices. Helped by deflation in the fuel and light category, the retail inflation in October 2023 softened at 4.9%.
Overall, the declining trend in the headline as well as core inflation is comforting in the current fiscal. However, it remains
to be seen if it sustains, given the weak prospects for the Kharif harvest and the expected hit to Rabi sowing amid lower
reservoir levels in major agricultural states.
Chart 5: Retail Price Inflation in terms of index and Y-o-Y Growth in % (Base: 2011-12=100)
173.4 182.9
174.7
163.8
Retail price index (number)
146.3 155.3 7.5%

130.3 135.0 139.6 6.7%
5.9%124.7 6.2%
Y-o-Y growth in %
112.2 118.9 5.5% 5.4%
4.9% 4.8%
4.5%
3.6% 3.4%
2.0%
Apr'22 - Oct'22
Apr'23 - Oct'23
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
Index number Y-o-Y growth in %
Source: MOSPI
The CPI is primarily factored in by RBI while preparing their bi-monthly monetory policy. The RBI has increased the repo
rates with the rise in inflation in the past year from 4% in April 2022 to 6.5% in January 2023.
Chart 6: RBI historical Repo Rate
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Jan-18
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Jan-17
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Oct-17
Oct-22
Oct-16
Oct-18
Oct-19
Oct-20
Oct-21
Oct-23
Jul-17
Jul-18
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
Source: RBI

12
However, with the inflation easing over the last few months, RBI has kept the repo rate unchanged at 6.5% in the last
four meetings of the Monetary Policy Committee. At the bi-monthly meeting held in October2023, RBI projected inflation
at 5.4% for FY24 with inflation during Q2FY24 at 6.4%, Q3FY24 at 5.6%, Q4FY24 at 5.2% and Q1FY25 at 5.2%
In a meeting held in October 2023, RBI also maintained the liquidity adjustment facility (LAF) corridor by adjusting the
standing deposit facility (SDF) rate of 6.25% as the floor and the marginal standing facility (MSF) at the upper end of the
band at 6.75%.
Further, the central bank continued to remain focused on the withdrawal of its accommodative stance. With domestic
economic activities gaining traction, RBI has shifted gears to prioritize controlling inflation. While RBI has paused on the
policy rate front, it has also strongly reiterated its commitment to bringing down inflation close to its medium-term target
of 4%. Given the uncertain global environment and lingering risks to inflation, the Central Bank has kept the window
open for further monetary policy tightening in the future, if required.
1.2.6 Concluding Remarks

The major headwinds to global economic growth are escalating geopolitical tensions, volatile global commodity prices,
and a shortage of key inputs. Despite the global economic growth uncertainties, the Indian economy is relatively better
placed in terms of GDP growth compared to other emerging economies. It is expected to grow at 6.3% in CY24 compared
to the world GDP growth projection of 3%. The bright spots for the economy are continued healthy domestic demand,
support from the government towards capital expenditure, moderating inflation, and improving business confidence.
Likewise, several high-frequency growth indicators including the purchasing managers index, auto sales, bank credit, and
GST collections have shown improvement in FY23. Moreover, normalizing the employment situation after the opening up
of the economy is expected to improve and provide support to consumption expenditure.
Further, as per the Indian Meteorological Department (IMD), the rainfall witnessed a deficit until September 2023. A drop
in yield due to irregular monsoons and a lower acreage can lead to a demand-supply mismatch, further increasing the
inflationary pressures on the food basket. Moreover, the consumption demand is expected to pick up in Q3FY24 due to
the festive season. Going forward, the rising domestic demand will be driven by the rural economy’s performance and
continual growth in urban consumption. However, high domestic inflation and global headwinds pose a downside risk to
domestic demand.
At the same time, public investment is expected to exhibit healthy growth as the government has allocated a strong
capital expenditure of about Rs. 10 lakh crores for FY24. The private sector’s intent to invest is also showing improvement
as per the data announced on new project investments. However, volatile commodity prices and economic uncertainties
emanating from global turbulence may slow down the improvement in private CapEx and investment cycle.
Furthermore, the industrial sector is expected to perform better among all sectors, as input costs are now moderating.
With flagship programmes like ‘Make in India’ and the PLI schemes, the government is continuing to provide the necessary
support to boost the industry sector. Similarly, the service sector is expected to see continued growth in FY24. However,
some segments in the service sector, like information technology, are likely to be impacted by the slowdown in the US
and European economies.

13
2. Overview of Indian Automobile Industry
2.1 Overview
The automotive industry is considered to be one of the major drivers of economic growth due to its linkages with multiple
industries. Its contribution to the GDP of India stands at around 7%. The growth of this sector benefits the commodity
sector as vehicle manufacturing requires steel, aluminum, plastic, etc. It also holds importance for the NBFC/Banks in the
form of automobile financing. Moreover, it is a crucial source of demand for the oil & gas industry.
India is the largest manufacturer of two-wheelers, three-wheelers, and tractors. Domestic automobile sales grew by 20%
on a year-on-year (y-o-y) basis in FY23, the first full year without any impact of the pandemic after a gap of two years.
The growth in sales volume across segments was supported by healthy demand in the urban areas, increasing
replacement demand, growing demand for utility vehicles in the passenger vehicle segment, vehicle scrappage policy,
and higher infrastructure spending.
Chart 7: Domestic Sales and Export of Automobiles in India
30.0 40.0%
35.9%
32.8%
30.0%
25.0
20.4% 20.0%
Sales (in Million Units)
Sales Growth (in %)

20.0
14.5%
10.0%
15.0 5.1% 5.7%
2.6%
0.0%
-12.9%
10.0 -5.4% -5.3%
-10.0%
5.6
4.8
4.7
4.6
4.1
-13.6% -15.2%
-17.5%
2.7
5.0 -18.0%
2.2
-20.0%
26.3
21.5
18.6
17.6
21.2
11.0
11.6
- -30.0%
2018-19 2019-20 2020-21 2021-22 2022-23 H1FY23 H1FY24
Domestic Sales Exports Domestic Sales Growth (in %) Exports Sales Growth (in %)
Source: SIAM
Note: Tractors sales are not included both in domestic and exports graph.
Despite inflationary pressure throughout the year, preponing purchases before the implementation of new fuel emission
norms (BS-VI Phase -II), easing of semiconductor chip supply, and pent-up demand supported the sales growth. All the
categories saw double-digit growth, with two-wheelers at 17%, passenger vehicles at 27%, commercial vehicles at 34%,
tractors at 12%, and 3-wheelers at 87% y-o-y growth in domestic sales. The automobile exports have increased at a
CAGR of 6.8% from FY17 to FY22.
On the other hand, exports declined by 15% y-o-y in FY23 due to ongoing global headwinds. Barring the passenger
vehicles segment, which grew by 15% with the increasing demand in the sports utility vehicle segments, the exports for
two-wheelers, commercial vehicles, tractors, and three-wheelers declined by 1%, 15%, 3%, and 27% respectively.
Accordingly, exports are expected to remain subdued in FY24 given the recessionary pressures across key export markets.
India is expected to be the third-largest in terms of volume by FY26. Across segments of the industry, India is positioned
amongst the leading markets, globally. India is the largest manufacturer of two-wheelers, three-wheelers, and tractors.
It is also among the top 5 manufacturers of passenger and commercial vehicles. The major growth drivers for the

14
automobile industry in India are growing household income, favourable demographics with a large proportion of the
young population, expanding R&D hub, and government support.
Besides growth prospects, India’s favourable Foreign Direct Investment (FDI) policy with 100% FDI through automatic
route, relatively low cost of manufacturing, and adequate manpower pool has attracted several foreign OEMs of the
industry to invest in India and set up a manufacturing footprint. Indian Automobile market segments
The Indian automobile market can be categorized in four segments – two-wheelers, three wheelers, passenger vehicles
and commercial vehicles. Two-wheelers and passenger vehicles dominate the domestic Indian auto market. Two wheelers
and passenger cars contributed to about 75% and 18% respectively of total automobile sales in FY23. The share of
various segments in automobile sales in India in FY23 is depicted below:
Chart 8:Share of different categories in automobile domestic sales
18% Passenger Vehicles
Commercial Vehicles
5%
2%
Three Wheelers
75% Two Wheelers
Source: SIAM
2.2 Automobile Industry Segment Wise Performance
1.2.7 Two Wheelers

This is the largest segment in Indian automobile industry contributing to around 75% of domestic sales volume in FY23.
The trend of domestic sales and exports of two wheelers in India is presented below:
Table 4:Market Trends of two-wheelers in India
Sales (in Units) 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

Domestic Sales 2,02,00,117 2,11,79,847 1,74,16,432 1,51,20,783 1,35,70,008 1,58,62,087
Exports 28,15,003 32,80,841 35,19,405 32,82,786 44,43,131 36,52,122
Source: SIAM
1.2.8 Passenger Vehicles

This is the second largest segment with sales with 18% market share in FY23. The trend of domestic sales and exports
of passenger vehicles in India is presented below:

15
Table 5: Market Trends of passenger vehicles in India
Sales (in Units) 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

Domestic Sales 32,88,581 33,77,389 27,73,519 27,11,457 30,69,523 38,90,114
Exports 7,48,366 6,76,192 6,62,118 4,04,397 5,77,875 6,62,891
Source: SIAM
1.2.9 Commercial Vehicles

This segment is considered as a lifeline for the economy as about two-thirds of goods and 87% of the passenger traffic
in the country moves via road. The growth of this segment is closely related with the industrial activity in the economy.
The trend of domestic sales and exports of commercial vehicles in India is presented below:
Table 6: Market Trends of commercial vehicles in India

Sales (in Units) 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
Domestic Sales 8,56,916 10,07,311 7,17,593 5,68,559 7,16,566 9,62,468
Exports 96,865 99,933 60,379 50,334 92,297 78,645

Source: SIAM
1.2.10 Three Wheelers

The three wheelers contribute to around 3% of total automobile domestic sales volume in India respectively. The trend
of domestic sales and exports in India is presented below:
Table 7: Market Trends of three-wheelers in India
Sales (in Units) 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

Domestic Sales 6,35,698 7,01,005 6,37,065 2,19,446 2,61,385 4,88,768
Exports 3,81,002 5,67,683 5,01,651 3,93,001 4,99,730 3,65,549
Source: SIAM

16
2.3 Automobile Industry Performance in FY23 and Outlook

The domestic automobile sales grew by 20% on a year-on-year (y-o-y) basis in FY23, the first full year without any impact
of the pandemic after a gap of two years. The growth in sales volume across segments was supported by healthy demand
in the urban areas, increasing replacement demand, growing demand for utility vehicles in the passenger vehicle segment,
vehicle scrappage policy, and higher infrastructure spending.
Despite inflationary pressure throughout the year, preponing purchases before the implementation of new fuel emission
norms (BS-VI Phase -II), easing of semiconductor chip supply, and pent-up demand supported the sales growth. All the
categories saw double-digit growth, with two-wheelers at 17%, passenger vehicles at 27%, commercial vehicles at 34%,
tractors at 12%, and 3-wheelers at 87% y-o-y growth in domestic sales.
On the other hand, exports declined by 15% y-o-y in FY23, due to ongoing global headwinds. Barring the passenger
vehicles segment, which grew by 15% on the back of increasing demand in the sports utility vehicle segments, the exports
for two-wheelers, commercial vehicles, tractors, and three-wheelers declined by 1%, 15%, 3%, and 27% respectively.
Exports are expected to remain subdued in FY24 due to recessionary pressures across key export markets.
The domestic automobile sales volume is expected to show moderate growth by 7-9% in FY24, after witnessing double-
digit growth in FY23. While passenger vehicle sales volume growth is expected to be healthy at 10-12% led by high
demand in the sports utility vehicle segment, two-wheeler sales volume growth is expected to remain moderate at 7-9%
due to the high cost of ownership and transition towards electric vehicles. Although consistently high inflationary and
interest rate environment could dampen consumer sentiment, monsoons remain a key monitorable for rural demand
growth going forward.
Two-wheeler sales volume is expected to grow by 7-9% in FY24, on account of high inflationary pressure, price hikes due
to regulatory changes, and higher cost of ownership as well as a transition towards electric vehicles. Also, uneven
monsoons could play a spoilsport and restrict the two-wheeler growth in the rural segment.
The passenger vehicle sales volume is expected to grow by 10-12% in FY24, led by increasing demand in the premium
and sports utility vehicle segment with new model launches and ease in availability of semiconductors. The commercial
vehicle segment is expected to grow by 5-7% in FY24, on account of higher growth due to structural upcycle in the
previous fiscals. The demand sentiments show some disruptions due to anticipated low order books on account of
upcoming general elections in 2024.
Chart 9: Trend in Indian Automobile Industry Domestic Sales Growth
Two Wheelers Passenger Vehicles Commercial Vehicles Exports Total Domestic Sales Growth
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
-40.0%
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Source: CareEdge, SIAM (Society of Indian Automobile Manufacturers), TMA (Tractors Manufacturers Association), CMIE

17
3. Indian Passenger Vehicle Industry
3.1 Overview
The Indian passenger vehicle industry forms around 18% of the total automobile industry in India in terms of domestic
sales. Indian PV industry is grouped into three major categories namely passenger cars, vans and Utility Vehicles (UVs).
The historical trend of domestic sales and of PV in India is depicted below:
Chart 10 : Historical Trend of Domestic Sales and Exports of Passenger Vehicle Industry in India
4.5 50.0%
39.6%
42.9% 26.7%
4.0 40.0%
3.5 30.0%
13.2%
2.7%
Sales (in Million Units)
-2.2% 18.3% 20.0%
Sales Growth (in %)

3.0 -17.9%
14.7% 6.9%
10.0%
2.5
-2.1% 0.0%
2.0 -4.8%
-10.0%
-9.6%
1.5
-20.0%
1.0
0.7
0.7
0.7
-30.0%
0.6
0.3
0.4
0.3
0.5 -38.9% -40.0%
1.9
2.1
2.7
3.4
2.8
3.1
3.9
0.0 -50.0%
2018-19 2019-20 2020-21 2021-22 2022-23 H1FY23 H1FY24
Domestic Sales Exports Domestic Sales Growth (in%) Exports Growth (in %)
Source: SIAM
The passenger vehicle (PV) industry grew by 6.9% y-o-y in H1FY24. This segment continued to show growth trajectory
for two consecutive fiscal years with improved vehicle availability and an influx of new and refreshed models from various
OEMs. This uplift was supported by enhanced supplies and an increasing variety in the product portfolio, which diversified
consumer demand. The market showed consistent demand for luxury cars and SUVs, signifying a robust consumer
appetite for premium segments. The segment also witnessed the benefit of good pending bookings and the launch of
promising products, laying the groundwork for potential growth in the upcoming festive season.
In addition, the exports during the quarter H1FY24 also grew by 18.3% compared to H1FY23 with increasing demand
from the utility vehicles and premium segment and consumer preference for cost-effective personal mobility options and
the introduction of some new models across various export markets, including Latin America, ASEAN, Africa, the Middle
East, Saudi Arabia, and neighbouring regions.
Moreover, in FY23, the industry recorded the highest PV sales with an annual volume growth of 27%. This segment
posted the highest-ever domestic sales surpassing the previous peak of FY19. The steep growth witnessed by the industry
was driven by post-COVID pent-up demand in the early part of FY23, a series of new model launches and better product
availability due to the easing of the semiconductor chips supply.
Furthermore, the demand for higher-end variants and premium SUVs helped sustain sales during FY23. The exports in
FY23 saw a growth of 15% y-o-y driven by a preference for cost-effective personal mobility options and the introduction

18
of some new models across various export markets, including Latin America, ASEAN, Africa, the Middle East, Saudi Arabia,
and neighbouring regions.
Moreover, passenger vehicles as a segment showed improvement in domestic sales with a growth of 13.2% on a y-o-y
basis for FY22. This post-pandemic demand was driven by a low base of FY21, the year that witnessed disruption amid
the global pandemic, which led to a strong preference towards personal mobility, and hence, passenger vehicles. In
addition, new launches by various OEMs aided the growth in this segment.
3.2 Segment Wise Performance
The passenger vehicle industry can be further classified into sub-segments as depicted below:
Passenger Cars – Passenger cars can be classified into six main categories namely Mini Cars, Super Compact Cars,
Compact Cars, Mid-Sized Cars, Premium Cars and Executive cars.
UVs – The MUVs can be classified into various categories based on length and price namely – Up to 4400 mm & price <
Rs. 20 lakh, 4401mm-4700mm & price < Rs. 20 lakhs, above 4700mm and price < Rs. 20 lakhs, price between Rs. 20-
30 lakh and price above Rs. 30 lakhs.
Vans – The vans can be classified as hard-top vans and soft-top vans.
The trend of share of various segments in the total domestic sales of passenger vehicles is depicted below:
Chart 11: Trend of domestic sales share of various PV segments
27.9%
34.1% 39.1%
48.5% 51.5%
6.4%
4.8%
4.0%
3.7% 3.6%
65.7% 61.1% 56.9%

47.8% 44.9%
2018-19 2019-20 2020-21 2021-22 2022-23
Passenger Cars Vans MUVs
Source: SIAM
It can be observed from the above figure that the share of UVs has grown consistently over the years while the share of
passenger cars and Vans have decreased. This reflects the growing inclination of consumers towards UVs and increased
focus of OEMs on product development and upgradations in UVs.

19
3.3 Key players in PV industry

The major players in the PV industry include Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Tata Motors Ltd, Mahindra
& Mahindra Ltd, etc. The market share of different players in FY23 is depicted below:
Chart 12 : - Market Share of key PV players in FY23
Maruti Suzuki India Ltd.

2%
2%
5% Hyundai Motors India Ltd.
4%
Tata Motors Ltd.
7%
41% Mahindra & Mahindra Ltd.
9% Kia Motors India Pvt. Ltd.
Toyota Kirloskar Motor Pvt. Ltd.
14% Renault India Pvt. Ltd.
Honda Cars India Ltd.

15%
Others
Source: - SIAM
The top three carmakers Maruti Suzuki, Hyundai, and Tata Motors reported their best ever sales performance during the
fiscal year ended March 2023. Interestingly, the share of Indian carmakers like Tata Motors and Mahindra & Mahindra
inched closer to occupying about a quarter of the industry’s sales of OEMs like Maruti Suzuki, Toyota, Honda, and Nissan
dipped below 50%. Owing to changes in consumer demand trends, new regulatory norms, and the increasing cost of
vehicle acquisition, the sales of the entry-level category continue to decline.

20
3.4 Profitability and Margins

Over the past few years, the price of passenger vehicles has increased significantly due to regulatory changes, transition
towards BS-VI norms, higher commodity costs and input prices, including that of semiconductors. Prices of inputs such
as steel, aluminum, paints and tyres have also spiked at its peak due to the ongoing geopolitical tensions. Though, the
commodity prices have softened now but players continue to hike price to recover earlier surges in raw materials.
Nonetheless, with the prices of inputs such as steel, aluminum, rubber declining gradually, the industry’s profitability is
expected to improve going forward. Most of the passenger vehicle OEMs have also announced periodic price hikes to
partially offset the input cost escalation. This led to an increase in the realization of passenger vehicle OEMs which is
likely to improve their profitability. But the industry still faces the threat of spiraling inflation and increasing financing
rates. The ongoing challenges both in global as well as Indian economy due to the pandemic, geopolitical tensions, global
logistics constraints, spiraling inflation and increasing financing rates, the economic recovery might get impacted in FY24.
Against this scenario, the companies are expected to see a pressure on profits during FY24. However, with the cooling
down of commodity prices, the industry’s margins are likely to improve going forward.
Chart 13: Crude Oil (Brent) Price
140
Crude Oil Price (Rs./Barrel)
120
100
80
60
40
20
0
Aug-21
Sep-21
Nov-21
Jan-22
Aug-22
Sep-22
Nov-22
Jan-23
Aug-23
Jun-21
Jul-21
Dec-21
Jun-22
Jul-22
Dec-22
Jun-23
Jul-23
Sep-23
Oct-21
Oct-22
May-21
Mar-22
May-22
Mar-23
May-23
Feb-22
Feb-23
Apr-21
Apr-22
Source: CMIE Apr-23
Chart 14: Price of Natural Rubber (RSS 4) *
20000
18000
Rubber Price (Rs./Quintal)
16000
14000
12000
10000
8000
6000
4000
2000
0
Jan-23
Aug-21
Nov-21
Jan-22
Aug-22
Nov-22
Aug-23
Jun-21
Jul-21
Sep-21
Dec-21
Jun-22
Jul-22
Sep-22
Dec-22
Jun-23
Jul-23
Sep-23
Oct-21
Oct-22
Feb-23
May-21
Mar-22
May-22
Mar-23
May-23
Feb-22
Apr-21
Apr-22
Apr-23
Source: Rubber Board- Ministry of Commerce & Industry
Note: RSS 4 stands for preferred raw material for tyres

21
Aluminium Price USD/Tonne)
Steel Price (Rs./Tonne)
1000
1500
2000
2500
3000
3500
4000
0
500
0
100000
120000
20000
40000
60000
80000
Source: CMIE
Source: CMIE
Apr-21
May-21 Apr-21
Jun-21 May-21
Jul-21 Jun-21
Aug-21 Jul-21
Sep-21 Aug-21
Chart 15: Steel Price Trend
Oct-21 Sep-21
Oct-21
Chart 16: Aluminium Price Trend

Nov-21
Nov-21
Dec-21
Dec-21
Jan-22
Jan-22
Feb-22
Feb-22
Mar-22
Mar-22
Apr-22
Apr-22
May-22
May-22
Jun-22
Jun-22
Jul-22
Jul-22
Aug-22
Aug-22
Sep-22

Sep-22
Oct-22
Oct-22
Nov-22
Nov-22
Dec-22
Dec-22
Jan-23
Jan-23
Feb-23
Feb-23
Mar-23 Mar-23
Apr-23 Apr-23
May-23 May-23
Jun-23 Jun-23
Jul-23 Jul-23
Aug-23 Aug-23
Sep-23 Sep-23
22
4. Electric Four-Wheeler Industry
4.1 Overview of Electric Vehicle Industry

The Electric Vehicle (EV) segment in India has been on an upward trend. This is in parallel with the declining domestic
sales of Internal Combustion Engine (ICE) vehicles in the last few years, attributed to the slowdown in the economy and
consumption demand in FY20, Covid-19 impact, and economic degrowth in FY21. The other factors impacting ICE vehicle
sales include increased fuel prices, semiconductor shortages, and increased vehicle prices. Whereas, in FY23, domestic
automobile sales grew by 20% across segments, supported by healthy demand in the urban areas, increasing replacement
demand, growing demand for utility vehicles in the passenger vehicle segment, vehicle scrappage policy, and higher
infrastructure spending. The sales trend of Electric Vehicles in India is depicted below:
Table 8: Electric Vehicle Sales in India
EV Sales (in Units) FY18 FY19 FY20 FY21 FY22 FY23 H1FY24
Two-wheeler 1,897 25,393 24,839 40,837 2,52,547 7,27,434 4,27,844
Three-wheeler 92,395 1,18,944 1,40,683 88,378 1,82,587 4,04,231 8,28,836
Four-wheeler 1,362 1,632 2,727 4,588 18,565 47,383 47,726
Goods vehicle 993 517 50 28 2,452 3,049 2,979
Total EV sales units 96,647 1,46,486 1,68,299 1,33,831 4,56,151 11,82,097 13,07,385
Source: Center for Energy Finance, CareEdge Research
Overall, the penetration of EVs has increased to 5.12% of the total vehicle sales in FY23. This can be compared to the
ambitious targets set by the Government of India at 30% EV penetration by 2030. Accordingly, the growing EV sales in
FY23 are accredited to favorable government policies to reduce upfront costs in EVs, expansion of charging infrastructure,
rising fuel prices, and shifting consumer preferences.
The two-wheeler and three-wheeler segments dominate the electric vehicles market in India, constituting around 62%
and 34%, respectively, of total EV sales in FY23. Electric two-wheelers (E2Ws) are a key segment of the electric vehicle
market in India, with growing interest among consumers and increasing government support for electric mobility. On the
other hand, electric three-wheelers (E3Ws) are an important mode of public transportation in India, particularly for last-
mile connectivity and intra-city transportation.
Chart 17: Overall EV Sales Penetration in India
30%
EV Sales Penetration (%)
5.25%
2.53%
0.38% 0.55% 0.79% 0.75%
FY18 FY19 FY20 FY21 FY22 FY23 FY30
Source: Centre of Energy Finance, CareEdge Research

23
4.2 Electric Four-Wheeler Industry in India

Electric four-wheeler (E4Ws) sales have grown at a significant pace in the past few years. The sales of E4W during H1FY24
stood at 47,426 units. The compounded annual growth rate (CAGR) of E4W during the period FY19 to FY22 stood at
65%. The sales have grown despite the Covid-19 outbreak and the subsequent imposition of the lockdown. As there are
limited models available in the E4W segment, major OEMs have planned to introduce more EV models in the future,
suitable for the Indian market which could possibly boost their adoption and increase competition in the market.
Chart 18: Electric Four-Wheeler Sales and E4W Penetration in India
60,000 6.0%
3.7% 4.1% 4.0% 3.7%
47,383 47,726 4.0%
50,000 2.3%
1.3% 1.2% 1.4%
2.0%
40,000
0.0%
30,000 -2.0%
18,565 18,695 -4.0%

20,000
-6.0%
10,000 5,132
2,339 -8.0%
1,213 1,823
- -10.0%
FY18 FY19 FY20 FY21 FY22 FY23 H1FY23 H1FY24
Electric Four-Wheeler E4W Penetration in total vehicle sales (4W ICE+E4W)
Source: Centre of Energy Finance, SIAM, CareEdge Research
The EV adoption in the four-wheeler segment has been low with E4W penetration in total Indian four-wheeler market at
low of 4% in FY23. As per the Society of Manufactures of Electric Vehicles, the demand incentives are given under the
Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India (FAME) scheme phase-II till October'22 for
E4Ws is Rs. 114 crores approx. which is supporting the growth. However, the key reason for the low penetration rate is
the high upfront cost. There is a lack of EV ancillary manufacturers in India and the majority of the EV components are
imported, with China being the largest supplier of EV components to India, resulting in an increase in EV prices. High
prices are a major concern for the large-scale adoption of four-wheeler electric vehicles due to the limited presence of
ancillary manufacturers in India. Hence, developing local manufacturing hubs for EV components could play a major role
in bringing down EV costs in the future and enable the sector to be resilient to supply disruption due to geo-political
disturbances. The other reasons attributing to the slow penetration of E4W are the lack of charging infrastructure.
4.3 Top four-wheeler EV Manufacturers in India

As the EV market is growing exponentially in India, four-wheeler manufacturers are gradually inclined to manufacture
more electric-run vehicles. A few major players in the E4W market include Tata Motors, Mahindra, Hyundai, and MG
Motors. However, other key players have announced plans to produce additional EV models fit for the Indian market in
the future, thereby increasing market rivalry and boosting adoption. This massive shift to electric mobility in India made
a tremendous impact on the E4W manufacturers in India.
• Tata Motors - Tata Motors is gaining a lot of traction in the EVs segments. With over 70% of the market share,
Tata Motors is currently the leading electric car manufacturer in India. Tigor EV, Nexon EV, and the Tiago electric

24
variant are some of Tata motors’ popular EVs. However, Tata has focused mainly on Passenger Vehicles and
electric buses.
• Morris Garage (MG) Motors - Originally a British company, MG Motors has recently started selling electric
vehicles in India. The company has an 8% market share, after tata motors in EV segment.
• Mahindra Electric - Mahindra Electric is the forerunner in the EVs industry. The electric revolution in India was
started with the iconic Mahindra electric car Reva relaunched in the year May 2010 after acquiring from RECC.
Mahindra dominated the electric car market for a long time in India with its iconic Mahindra e-Verito/ Mahindra
E20 and e-Verito are the two popular EV variants by Mahindra Electric. Over the year Mahindra launched several
electric vehicles in different segments like electric vans, electric autos, and e-three wheelers.
• Hyundai - Hyundai, with the launch of its Kona EV in India, has overwhelmed the EV market in India.
4.4 Outlook on E4W Industry

There is a growing thrust on the adoption of electric vehicles (EVs) across the globe amid increasing carbon emissions
which have serious repercussions including global warming. As India is significantly dependent on crude oil imports and
various cities in India are facing pollution menace, the Indian government has also acknowledged the need to promote
EVs. However, the penetration in the electric four-wheeler segment is low which can be attributed to various factors such
as high upfront costs and the lack of models in the market that qualify for government incentives. The EV financing rate
in India is also higher compared to internal combustion engine (ICE) vehicle rates, which is also one of the headwinds
impacting EV sales. The unknown risks of technology, residual value, and newer brands are the reason that electric vehicle
financing have higher interest rates.
One of the key drivers behind the growth of E4Ws in India is the increasing concern over air pollution and the government's
push towards green mobility. In order to reduce the carbon footprint in India, electric vehicles are seen as a key part of
the solution. Additionally, the government's push towards electric mobility is aimed at reducing India's dependence on
fossil fuels and creating a more sustainable energy ecosystem. Another factor driving the growth of E4Ws in India is the
increasing affordability of electric cars. While electric cars were initially priced higher than their petrol and diesel
counterparts, the cost of ownership has come down significantly in recent years due to various government incentives,
subsidies, continuous advancements in battery technology for cost reduction, increased battery capacity, and tax
exemptions.
In the latest budget government has introduced more such policies that will surely help the sector like the customs duty
on capital goods and machinery for manufacturing EV batteries has been exempted and the duty on lithium batteries has
been decreased from 21% to 13% as part of the Union budget for 2023- 2024, which will eventually result in lower pricing
and more investment in the industry, The government of India has planned to achieve 100% e-mobility by 2030 in smart
cities and this opens up a huge market for EVs. Smart City Mission, is an urban renewal and retrofitting program by the
Government of India with the mission to develop 100 cities across the country making them citizen friendly and
sustainable. EVs are the solution for both better quality of life and reduction in environmental footprint and hence EVs
will be integrated as part of smart city transportation. Smart mobility solutions are a must as it not only helps in a better
quality of life but also help in reducing its environmental footprint. In the Union Budget 2023-24, the government has
allocated INR 35,000 crore to achieve the energy transition, energy security, and net zero objectives, which will help the
EV industry to work alongside in addressing the issues related to Climate Crisis.

25
Despite the positive outlook, there are several challenges that need to be addressed for the E4W market to grow at its
full potential. One of the key challenges is the lack of charging infrastructure, particularly in rural areas. While the
government has announced plans to set up charging infrastructure, it is still at a nascent stage, and there is a need for
significant investment in this area. Another challenge facing the E4W market is the lack of adequate policy support and
incentives. While the government has announced several incentives for the electric vehicle industry, including tax
exemptions and subsidies, there is a need for more comprehensive policy support to drive the growth of the E4W market.
In addition to that, there is a lack of quality standards and regulations, which can lead to quality issues and safety
concerns for consumers. The E4W have caught fire recently, which has risen concern about their safety. However, the
government is working towards addressing this issue by introducing new regulations and quality standards.
Despite these challenges, the outlook for E4Ws in India is positive, with several major players, including Tata Motors,
Mahindra & Mahindra, and MG Motors, entering the market. Commercial fleets, such as taxis and commodities delivery
services, will drive demand for the E4W market in the short to medium term. Further, over the next several years, OEMs
intend to offer additional EV models fit for the Indian market, which could potentially promote adoption and raise
competition in the market. Additionally, the growing interest in sustainable transportation alternatives among consumers,
combined with the increasing availability of affordable E4Ws, is expected to drive further growth in the coming years.

26
5. Key Government Initiatives
Various government initiatives for the passenger vehicle industry are as below: -
1) Current policy framework/regulations pertaining to Electric Vehicles industry in the passenger

vehicles segment
Automotive industry globally is at the cusp of a major transformation. Growing concerns for environment and energy
security clubbed with rapid advancements in technologies for powertrain electrification, increasing digitalization, evolution
of future technologies and innovative newer business models and ever-increasing consumer expectations are transforming
the automotive business. One of the key facets of such a change is the rapid development in the field of electric mobility
which might transform the automotive industry like never before. The government had launched FAME (Faster Adoption
and Manufacturing of (Strong) Hybrid and Electric Vehicles in India) in 2015 with the objective of promoting and facilitating
adoption of Electric Vehicles in India. The second phase of the scheme FAME II was launched from April, 2019 for three
years with a total budgetary support of Rs 10,000 crore.
2) Production Linked Incentive (PLI) scheme
The government has launched PLI scheme in April 2020 which offers a production linked incentive to boost domestic
manufacturing and attract large investments in specified sectors. The scheme shall extend an incentive on incremental
sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies, for a
period of five (5) years. Automobiles and Auto sector is one of the various sectors approved under this scheme in
November 2020. The outlay earmarked for auto sector is Rs. 57,042 crores.
3) Production Linked Incentive (PLI) scheme for Semi-Conductors
The global automobile industry is facing supply chain disruptions amidst severe semiconductor shortage. On December
15, 2021, the Government of India has proposed to provide incentives of Rs. 76,000 crores for the development of
semiconductors and display manufacturing ecosystem. This scheme will provide globally competitive incentive package
to the companies for setting up plants in India in order to manufacture high quality semiconductor chips over the next 6-
10 years. The government would extend upto 50% of project’s cost to eligible display and semiconductors fabricators and
is expecting to establish 2 greenfield semiconductor fabs and 2 display fabs and at least 15 units of Compound
semiconductors packaging by facilitating capital support and technological collaborations. This initiative will further help
to strengthen the domestic semiconductor manufacturing capacity and support the automobile industry over the medium
term.
4) Use of Dual Fuel
The Ministry of Road Transport and Highways has issued a notification for Dual fuel usage which covers emissions from
agriculture tractors, power tillers, construction equipment vehicles and combine harvesters driven by dual fuel diesel with
Compressed Natural Gas (CNG) or Bio-Compressed Natural Gas (Bio-CNG) or Liquefied Natural Gas (LNG) engines.

27
6. Demand Drivers of Passenger Vehicle Industry
The major demand drivers for PV industry in India are discussed below:
1. Low car penetration & Rising family income:

India has very low car penetration with about 20 cars per 1000 people, which is expected to rise with the increase in
household income as per the NITI Aayog report. The growing domestic income is expected to make passenger
vehicles more affordable for local consumers.
2. Urbanisation:
Urbanization is a key driver of India’s overall growth. Urbanization of India’s population is growing. A larger population
base, warranting a need for more vehicles. This would create opportunity for sales of passenger as well as commercial
vehicles. Delhi, Mumbai, and Kolkata will be among the world’s largest cities. This rapid urbanization would increase
the demand of vehicles.
3. Favourable demographics and increasing domestic customer base:

The customer base in India is witnessing rising income levels and improvement in overall employment. Rise in
education among the youth could lead to a decline in dependency ratio and enhance lifestyles. This, in turn could
strengthen discretionary spending on new vehicles as well as purchase of old vehicle.
4. Greater Availability of cheaper and easier finance:

All nationalized and scheduled banks offer loans for purchase of new vehicles at competitive interest rates. In India,
most of the new vehicle purchases are done by using bank loans. Increase in financial inclusion and accessibility to
cheaper and easier finance, are expected to be key demand drivers for passenger vehicles.
5. Support infrastructure and rising investment by foreign companies:

India is transforming into a global automotive R&D hub with several market players entering the automotive
development and manufacturing space. This has been supported by the availability of low-cost workforce, government
schemes, cost advantages in setting up manufacturing facilities and access to large customer base.

28
7. Challenges faced by Indian Passenger Vehicle Industry
The Indian PV industry has witnessed slowdown in the recent years. The major challenges faced by the industry are
discussed below:
1. Slowdown in economy
There has been a sluggishness in domestic private consumption demand, manufacturing, merchandise exports growth,
etc. Sluggishness in private consumption is reflected in limited income growth, cost increases, slowing real estate demand
and an overall dent to consumer sentiment. In fact, much of this cyclical slowdown has affected sectors that are large
employment generators, suggesting that incomes and/or employment growth in them are expected to have suffered. As
households have been dipping into their savings while also leveraging themselves, their ability to spend could be
constrained. In addition to the consumption slowdown, automobile demand was further impacted by continued tightening
of liquidity conditions and negative sentiments in the rural market.
2. Semi-Conductor dependence
The passenger vehicle industry has been impacted due to shortage of semiconductor chips for a long time now. The
production volumes have been under pressure and OEMs had to take significant production cuts during the month.
The semi-conductors for automotive segments accounts for 11% to the overall semiconductor demand. The use of
electronics in vehicles have been continuously increasing. Currently it accounts for 40% of average automobile usage,
thus increasing higher dependence on semi-conductors. The semi-conductors used across various segments in vehicles
includes: -
• Interior and Exterior Lightening
• Safety control related system and Chassis (ABS, Airbag etc.)
• Telematics Communication Systems
• Audio and Video based infotainment system
• Interior body control system (Climate Control, Power System, Electric Power Steering etc.)
• Autonomous driving system & driver’s assistance
• Battery centered drive system
The supply chain has been impacted due to the pandemic and it takes almost 6 months from Chip production to vehicle
production. The ongoing semiconductor chip shortage remains the most significant headwind on a global level. There
have been some signs of improvement recently. However, it remains to be seen when the industry will return to a more
stable rate of production.
3. Steep rise in raw material prices increasing the cost of vehicles

PV sales are expected to be affected from the high acquisition costs and rising fuel prices. OEMs have increased prices of
their products due to rising input costs. Domestic steel and aluminum prices have risen by around 30-40% due to the
ongoing geopolitical tensions. Domestic PV tyre prices have also risen by around 3-4% in FY22. Prices of automotive
paints too have risen at a double-digit pace. In response to that, the OEMs have hiked vehicle prices during FY22. Such
a steep hike in vehicle prices is likely to dampen demand sentiments of price sensitive buyers.
4. Safety norms and BS-VI increasing the acquisition cost of vehicles
In an attempt to improve the vehicle safety conditions, the government has made safety features such as anti-braking
system (ABS), combined braking system (CBS), air bags, seat belts, speed limit trackers and rear parking sensor
mandatory for various vehicle segments. Moreover, automakers have to comply with CAFE (corporate average fuel
efficiency) guidelines that are applicable for PVs. Most of the automakers complied with the first phase of CAFÉ norms in

29
fiscal 2018 itself. In fact, by fiscal 2023 (the second phase of CAFE), major OEMs will be only 5% away from the required
fuel efficiency. All these norms increase the vehicle cost and adversely impact the demand.
5. Impact of Electric Vehicles
There is increasing government’s thrust for adoption of Electric Vehicles (EVs) in India in the recent years. This has led
to most of the auto manufacturers planning to launch EVs in India with some of the players. This creates some uncertainty
for both the consumers and manufacturers of automobiles over the demand and supply of petrol/diesel-based PVs which
may lead to consumers deferring their purchase plans. However, considering the challenges revolving around EV
ecosystem, it will be difficult to imagine passenger vehicles without petrol/diesel engines at least in the near term.

30
8. Outlook - Stable
The CareEdge Research expects passenger vehicle sales volume growth to be healthy at 10-12% in FY24 on account of
increasing demand in the premium and sports utility vehicle segments, easing of semiconductor chip supply, upcoming
festive season, and easy availability of financing options. Most PV manufacturers have larger order backlogs with waiting
periods for popular models ranging between 8-10 months. In order to reduce the waiting period for vehicles,
manufacturers are likely to add capacities over the next few years.
However, the growth rate of the passenger vehicle industry may moderate due to a strong base effect of the last fiscal
as well as macro factors including high interest rates, inflation, and cost impact from new regulatory norms. Though the
commodity prices have softened, players continue to hike prices to recover earlier surges in raw materials.
In addition to that, the robust EV segments are also increasing investments by the OEMs in the EV space. The demand
for personal vehicles remains robust with the trend of electrification further strengthening.
Going forward, the demand sentiment is expected to improve owing to investments from the PLI scheme, new launches
of vehicles, and a strong order book. Also, enhancement in India’s manufacturing capabilities will further help to support
the passenger vehicle industry demand over the long term.

31
tically.
Contact
Praveen Pardeshi Assistant Director Praveen.pardeshi@careedge.in 022 6837 4400
Vikram Thirani Director vikram.thirani@careedge.in 022 6837 4434
Crude
AboutOil CARE
: Price goes down
Analytics and then
and Advisory recovers
Private Ltd (CareEdge Research)
The oil prices of July reflect the rising optimism about
Exhibitsuperior
CareEdge (CARE Group) is a knowledge-based analytical group that aims to provide
the oil demand recovery in H2-CY21. This is amid the 3: Brent price
insights basedmovement (USD
on technology, /
data analytics
capability and detailed research methods. CareEdge (CARE Ratings 78 Limited) is one of the leading barrel)
credit rating agencies in India. It has
expectations of track
an impressive a tight global
record oilcompanies
of rating market. forThe 18th
almost three decades and has played a pivotal role in developing the corporate debt
market in India. CareEdge provides near real time research 77
on all domestic and global economic developments. CARE Analytics & Advisory
OPEC and non-OPEC Ministerial meeting held on 1st
76 and consultancy services including the following:
Private Ltd is a wholly owned subsidiary focused on providing advisory
July, to decide oil supply changes did not reach any
75
conclusion, as U.A.E. opposed its quantity of supply
74
changes. The meeting which continued on the next
73
day also remained unsuccessful and hence was
72
pushed to 5th July, where the outcome was
71
undecided. During these days, the investors expected
70
this meeting to conclude with an elevation in oil
69
supply. Hence Brent rose to highs of USD 77/barrel
68
on 5th July.
17-07-2021
01-07-2021
03-07-2021
05-07-2021
07-07-2021
09-07-2021
11-07-2021
13-07-2021
15-07-2021
19-07-2021
21-07-2021
23-07-2021
25-07-2021
27-07-2021
29-07-2021
In the following two days (6th and 7th July), crude oil
prices ended lower as the failed OPEC+ talks, led to
expectations of additional unilateral supplies from individual countries, coupled with more supplies from U.S. From 8th to
13th July, prices rose marginally as API reported a decline in U.S. crude oil inventory and weakness in US Dollar. For the
following three days (14th-16th July), prices ended lower on reports of compromise over oil production deal between
Saudi Arabia & U.A.E.
On 19th July, crude oil prices declined 6.8% or USD 5/barrel, following the decision by OPEC+ to boost oil supply beginning
August 2021, in the 19th OPEC and non-OPEC Ministerial Meeting held on 18th July. However, 20th July onwards, prices
rose each day, on hopes of economic recovery, which outweighed the concerns of rising covid-19 cases in Africa, US and
Asia
CARE Advisory Research & Training Ltd
(Wholly-owned subsidiary of CARE Ratings Ltd.)
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Submitted by CARE Advisory Research and Training Ltd

India – Passenger Vehicle

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1.1 Global Economy

World Advanced Economies Emerging Market and Developing Economies

Real GDP (Y-o-Y change in %)

Advanced Economies Group

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Emerging Market and Developing Economies Group

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1.2 Indian Economic Outlook

1.2.1 GDP Growth and Outlook

Resilience to External Shocks remains Critical for Near-Term Outlook

GDP Growth Outlook

Table 2: RBI's GDP Growth Outlook (Y-o-Y %)

Source: Reserve Bank of India

1.2.2 Gross Value Added (GVA)

Industry and Services sector leading the recovery charge

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Table 3: Sectoral Growth (Y-o-Y % Growth) - at Constant Prices

FY20 FY21 FY22 FY23

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FY19 FY20 [3RE] FY21 [2RE] FY22 [1RE] FY23 [PE]

1.2.3 Investment Trend in Infrastructure

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1.2.4 Industrial Growth

Chart 4: Y-o-Y growth in IIP (in %)

1.2.5 Consumer Price Index

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146.3 155.3 7.5%

Chart 6: RBI historical Repo Rate

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1.2.6 Concluding Remarks

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2. Overview of Indian Automobile Industry

Chart 7: Domestic Sales and Export of Automobiles in India

Sales Growth (in %)

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Chart 8:Share of different categories in automobile domestic sales

18% Passenger Vehicles

75% Two Wheelers

2.2 Automobile Industry Segment Wise Performance

1.2.7 Two Wheelers

Table 4:Market Trends of two-wheelers in India

Sales (in Units) 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

1.2.8 Passenger Vehicles

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Table 5: Market Trends of passenger vehicles in India

Sales (in Units) 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

1.2.9 Commercial Vehicles

Table 6: Market Trends of commercial vehicles in India

Domestic Sales 8,56,916 10,07,311 7,17,593 5,68,559 7,16,566 9,62,468

Exports 96,865 99,933 60,379 50,334 92,297 78,645

1.2.10 Three Wheelers

Table 7: Market Trends of three-wheelers in India

Sales (in Units) 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23