India became the third-largest automobile market in 2022, surpassing Japan as vehicle sales rose on the back of easing semiconductor issues and a strong demand rebound during the festival season.
India's passenger and commercial vehicle sales rose by 26pc against the previous year to 4.73mn units during January to December 2022, according to Society of Indian Automobile Manufacturers (Siam).
"While the demand for passenger vehicles was aided by strong underlying demand and an easing up of semiconductor shortages, the commercial vehicle segment benefited from increased economic activity, replacement demand, and consequently, improvement in fleet utilisation levels", said credit rating agency Icra's vice president and sector head at corporate ratings Rohan Gupta.
Domestic automobile demand had suffered since 2020 due to Covid lockdowns and restrictions, but most workplaces, along with schools and colleges, reopened in the country early in 2022 after the third wave of the virus subsided.
Japan's automobile sales during 2022 fell by 5.6pc on the year to 4.2mn units, according to Japan Automobile Manufacturers Association. The decline was mainly because of low production as a shortage of auto components, especially semiconductor chips, continued to weigh on the country's auto sector.
Japan's largest car producer Toyota had lowered its output forecast in November by 500,000 units to 9.2mn units for the April 2022-March 2023 fiscal year from the output originally planned in May.
China remained the top automobile market in 2022 as sales rose by 2.1pc from 2021 to 26.9mn, while United States held the second spot even as sales fell by 8pc on the year to 13.7mn units last year, according to National Automobile Dealers Association.
Icra expects the Indian automotive industry demand to remain steady, with growth at around 6-9pc over the medium to long term on supporting factors such as rising per capita income, demographic profile, low vehicle penetration and favourable policy environment including infrastructure development, according to Gupta. The Indian steel industry gets 8-10pc of its demand from the automobile sector.
India's automobile sales including passenger, commercial, three and two-wheeler vehicles during December rose by 4.4pc on the year to 1.3mn, but production declined by 5.6pc on the year to 1.56mn, according to Siam. April to December output rose by 17pc on the year to 19.8mn units and sales increased by 24pc against the previous year to 16.1mn units.
Total auto sales by dealers across the country eased by 5.4pc on the year to 1.62mn units in December, data from India's Federation of Automobile Dealers Associations (Fada) show. Sales during the calendar year 2022 rose by 15pc on the year to 21.1mn units.
Strong economic growth will support the automobile sector in the near-term, according to Fada, but inflation and new Bharat Stage VI phase 2 emission norms that can further lead to price hikes will act as headwinds.
