Indian automobile sales and output increased in January on the back of strong demand for passenger vehicles, while the government's budget for the April 2023-March 2024 fiscal year is likely to further boost the sector.
India became the third-largest automobile market in 2022, surpassing Japan as vehicle sales rose on the back of easing semiconductor problems and a strong demand rebound during the festival season.
Sales rose by 7.9pc on the year to 1.53mn units in January, while production increased by 1.6pc from a year earlier to 1.90mn units, according to the Society of Indian Automobile Manufacturers (Siam). Sales and production rose by 16pc and 22pc on the month, respectively.
Sales moved up by 22pc on the year to 17mn units during April-January, with passenger vehicle sales increasing by 32pc on the year to 3.17mn and two-wheeler sales by 19pc to 13.4mn units, according to Siam. Production rose by 15pc on the year to 21mn units during April-January.
"Better consumer sentiment is driving demand for passenger vehicles… [but] the rate of growth of two-wheelers in the recent year has not kept pace with the growth in the other segments," Siam president Vinod Aggarwal said. "Positive announcements in the union budget should help in continuing with the overall growth momentum."
The Indian government in its budget of 2023-24 steeply raised capital expenditure and announced tax reliefs, which are expected to lift automobile consumption. The Indian steel industry gets 8-10pc of its demand from the automobile sector.
Total auto sales by dealers across the country rose by about 13pc on the year and on the month to 1.83mn units in January, data from India's Federation of Automobile Dealers Associations (Fada) show.
"With China's factory activity once again gaining pace, global supplies of parts and semi-conductors will see a recovery, thus aiding better vehicle supplies and lower waiting period in future," Fada said. "This will further fuel growth for the already healthy passenger vehicle category."
The dealers' association sees budget announcements aiding overall growth of automobile retail sales, with entry level two-wheelers and passenger vehicles demand receiving a boost because of enhanced income tax rebates, budget allocations for vehicle scrappage policy and import duty exemptions for manufacturing lithium batteries, the last of which will reduce EV acquisition cost.
