Indian Automotive Industry Anticipates Moderate Growth In FY2024: ICRA


The Indian automotive sector is set to experience moderate growth over the near to medium term, according to a report by ICRA, one of India’s leading credit rating agencies. While the recovery has been evident in various segments of the automotive industry, the pace and extent of revival differ across sectors.

In the fiscal year 2023, the passenger vehicle industry reached all-time high volumes, thanks to a preference for personal mobility and stable semiconductor supplies. The demand for passenger vehicles is expected to continue to be strong in fiscal year 2024, with a projected growth rate of 6-9% year-on-year.

Similarly, the commercial vehicle industry exhibited robust growth in volumes in fiscal year 2023, albeit on a curtailed base. However, in fiscal year 2024, the growth is anticipated to remain at modest levels, with a projected growth rate of 2-4% year-on-year. Despite this moderation, the industry is expected to approach pre-pandemic highs.

In contrast, the two-wheeler industry has faced challenges in reaching pre-Covid peak levels due to rising ownership costs. While there’s an expectation of moderate growth in volumes for fiscal year 2024 (4-7% year-on-year), sustained recovery in demand is uncertain, primarily due to concerns regarding uneven monsoon precipitation’s impact on rural demand.

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Mr. Shamsher Dewan, Senior Vice President and Group Head – Corporate Ratings at ICRA commented on the industry’s outlook, stating that growth across different automotive segments would remain at moderate levels in fiscal year 2024. Passenger vehicle volumes are expected to continue their upward trajectory, while the two-wheeler industry is set to record moderate growth due to a low base. Meanwhile, the commercial vehicle industry is anticipated to have steady demand, but growth in volumes is expected to be modest.

ICRA’s forecast for the automotive sector includes a compound annual growth rate (CAGR) of approximately 6-9% over the medium to long term. Factors such as rising per capita incomes, favorable demographics, low vehicle penetration, and a supportive policy environment are expected to drive steady industry demand.

The electric vehicle (EV) segment has also seen promising growth, boosted by government subsidies, awareness campaigns, and new product launches. The electric two-wheeler (e2w) segment, in particular, has accounted for a significant portion of total EV sales. Although a reduction in subsidies for e2ws under the FAME II policy has slowed the pace of adoption, OEMs are focusing on value engineering to make EVs more affordable.

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In the near term, OEMs are expected to invest significantly in the development of ground-up EV platforms and expand their manufacturing capacities. While this investment might affect return indicators in the short to medium term, it supports India’s competitive manufacturing capabilities and export prospects.

Over the near term, the domestic market is expected to drive growth, while export prospects remain weak due to a shortage of dollars in key markets and inflationary pressures.

In conclusion, the Indian automotive sector is poised for moderate growth, with various factors, including the electrification of vehicles, influencing the industry’s dynamics. ICRA’s report underscores the need for continued investment and adaptation to navigate the evolving landscape of the automotive industry.

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