The year gone by saw the auto sector sustain its growth amid supply chain challenges, while the growth in battery-powered vehicles signalled India’s entry into the decade of EVs. The EV industry will end 2022 with record sales and, going forward, the EV journey will only become stronger.
The year 2022 belonged to sport utility vehicles (SUVs) in the passenger vehicle industry as numerous new products attracted many buyers. As a result, for the first time, total annual sales of SUVs (including entry, mid-level and premium SUVs) will be higher than the sales of cars in the Indian automotive history.
Chip shortages that began in the latter part of 2021 continued through 2022, constraining the production of automobiles — PVs, in particular. Also, the rise in commodity prices led to an increase in the prices of vehicles. “The calendar year has seen its share of challenges — starting with the supply constraints, primarily for semiconductor components. Also, the Ukraine conflict from February, disrupted supply chains further, and increased the cost of fuel and certain commodities,” said Rajesh Menon, Director General, Society of Indian Automobile Manufacturers (SIAM).
The PV industry is expected to end 2022 with its highest-ever annual volumes of about 3.8 million units, of which, total UV volumes are estimated at about 1.9 million units and cars at 1.6 million-plus units. The industry has already crossed the annual volume level of 2021, 2019 and 2018 in the the 11 months of 2022.
“The share of hatchbacks have come down in the past two years, mainly due to affordability factors. On the other hand, there is a greater consumer preference for SUVs. At present, two segments make up the bulk of the volumes in the SUV market. About 54 per cent of the SUV market is contributed by the compact SUVs (under 4-meter length), while mid-SUVs account for 44-45 per cent,” said Shashank Srivastava, Senior Executive Director (Marketing & Sales), Maruti Suzuki India.
It was also a year of stability in the demand for the Commercial Vehicle (CV) segment. The M&HCV (medium and heavy commercial) category, in particular, recorded strong growth.
M&HCV trucks have been recording strong double-digit growth of 15-20 per cent, supported by traction in construction and mining activities, as well as pent-up replacement demand. However, it is yet to reach its earlier peak of 2018. The LCV truck segment growth remains intact, driven by the e-commerce segment.
Bus segment revives
It was also the year of the revival for the bus segment, as the pandemic-related challenges eased and educational institutions and offices opened up. The segment is growing at 90-95 per cent.
While all categories reported gradual recovery and moved into a higher growth trajectory in the post-pandemic phase, two-wheeler demand suffered. There are many reasons for this, including reduced discretionary income of prospective buyers, relentless hikes in the price of two-wheelers due to regulatory changes, and inflationary pressures. Rural-dependent entry bike segment was among the worst affected. The two-wheeler segment is likely to end 2022 with a marginal increase in total volumes.
“The festive season brought some respite to the two-wheeler sector, with retail offtake in October 2022 even higher than the pre-pandemic levels. We are cautiously optimistic about demand recovery next year amid headwinds such as elevated ownership costs and increase in financing rates,” said Rohan Kanwar Gupta, Vice-President & Sector Head, Corporate Ratings, ICRA.
The most important development in 2022 was the beginning of the optimistic transition from internal combustion engine-powered vehicles to battery-powered vehicles, particularly in segments such as two and three-wheelers and buses. Thanks to government schemes such as FAME and production-linked scheme for advanced chemistry cells and the government’s focus on ramping up EV charging infrastructure made EVs accessible and affordable for Indian consumers.
EV ecosystem
The penetration of EVs saw a decent increase in two-wheelers and three-wheelers with the launch of numerous quality products on the back of improving the overall EV ecosystem.
“From about 4,000 units a month in June 2021, the monthly run rate of electric two-wheelers grew to about 80,000 units towards the end of 2022, a 20x growth. From less than one per cent penetration in 2021 to almost 6 per cent in just a year,” said Bhavish Aggarwal, CEO of Ola Electric, which has now emerged as India’s top electric two-wheeler company by volume.
Several surveys indicate that electric two-wheelers have a total cost of ownership (TCO) that is up to 40 per cent lower than comparable ICE models when used more than 40 kms a day. Though TCO is lower for electric cars at present, ride-hailing companies are witnessing competitive TCO, and this is likely to get better.
“Factors such as minimal range anxiety and a viable total cost of ownership will continue to spur faster penetration in electric 2 & 3 wheelers and intracity bus segments over the near to medium term,” said Shamsher Dewan, Senior Vice-President & Group Head – Corporate Ratings, ICRA.