Indian auto industry hopes for smoother sailing in the new year after a bumpy 2021

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India’s auto industry heads into 2022 on a positive note to match pre-pandemic sales volume, having laid solid foundations in 2021 as semiconductor shortages hamper production. Since demand in the passenger car segment remains buoyant despite the challenges posed by rising raw material prices, many automobile manufacturers are optimistic about adopting new technologies, especially in the field of electric mobility, which will see a number of market launches in both the four-wheel and two-wheel categories next year.

While the Omicron variant of COVID is still a problem for many automakers, they believe the lessons learned from the past two years will be useful for doing business as they have embraced digitization on a large scale, even if it is there should be a third wave. In an interaction with PTI, the chairman of Maruti Suzuki India, RC Bhargava, expressed the hope that 2022 would do better for the industry compared to 2021.

“This year we had major production downtimes due to the shortage of semiconductors. I think the situation will be much better in 2022, ”he said, adding that the economy will grow faster, which is a positive factor. “All of this taken together, aside from the uncertainty surrounding the Omicron variant, suggests, in my opinion, that 2022 would be a much better year,” he said.

SIAM General Manager Rajesh Menon admitted that 2021 had turned out to be a very challenging year for the industry, but he also expressed hope for better churn in the new year. “The auto industry is hoping that Omicron’s new twist on COVID won’t play a big spoilsport and that society and the economy can be kept alive with proper health and safety precautions. We hope that once the semiconductor crisis eases, the industry expect it will get better in 2022, “he said.

Favorable government policies such as extending the FAME II program to 2024, improving incentives for two-wheelers and introducing the production-linked incentive system (PLI) for the automotive and auto components sectors for about Rs.26,000 billion and PLI for advanced chemistry cell for about 18,000 crore Rs will be tremendously helping the sector adopt advanced technology, noted Menon. While the recently announced Rs 76,000 billion incentive scheme for semiconductor manufacturing over six years is encouraging, he said the announcements about the establishment of scrapping centers, inspection and certification facilities would result in the scrapping of vehicles that are not roadworthy, creating demand.

Shailesh Chandra, President of Tata Motors’ Passenger Car Business Unit, shared the optimism: “Going forward, we expect demand for internal combustion engine cars and electric vehicles to remain strong, despite concerns about semiconductor supply and high input costs alongside uncertainties stop. “combined with the Omicron variant.” Mahindra & Mahindra Executive Director (Auto and Agricultural Sectors) Rajesh Jejurikar noted that the industry as a whole has had an enormous learning curve, be it in terms of resource management, supply chains, the introduction of technology and digitization to improve the customer experience and to innovate quickly to react to changing dynamics. “I have a feeling that these insights will be of use to us as we continue to develop,” he added.

However, Gaku Nakanishi, President and CEO of Honda Cars India, said the outlook for 2022 remains “cautiously optimistic due to concerns about the steady rise in raw material costs and supply-side constraints.” A Hyundai spokesman noted, “The automotive sector is currently experiencing several changes, with the government pursuing a variety of initiatives in parallel to stimulate the automotive sector through product-related scrapping policies, etc.” “We are cautiously optimistic as the government has taken a number of initiatives to encourage investment and growth across the Indian manufacturing value chain,” the spokesman said.

From the perspective of the luxury car manufacturer, Martin Schwenk, Managing Director and CEO of Mercedes-Benz India said: “The demand outlook is positive. We have laid a good foundation this year … the pandemic crisis … For the luxury segment, I would definitely imagine that we can return to the growth rates on an annual basis that we had up to, say, 2018. “Audi India Head Balbir expressed a similar opinion Singh Dhillon that the segment is showing encouraging signs and that the pace is expected to pick up in the coming months. Still, he said, “The luxury auto industry will take an average of two more years for sales to hit pre-pandemic levels of 35,000 to 40,000 units per year. The industry needs a stable policy so that the segment can grow. Taxation and customs structures make the expansion of the segment more difficult. “Schwenk also pointed out that there is” always a disclaimer because everyone is wondering what will happen next with which variant of the virus “.

Given the challenges the auto industry faced in 2021, Menon said the second wave of the COVID pandemic and subsequent tiered nationwide lockdowns in April and May, as well as supply chain disruptions due to the ongoing global semiconductor shortage, were having a serious impact on the industry had. Rising raw material prices put the industry under enormous cost pressure, so that there were several price increases in all vehicle segments in 2021, he said.

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Of the auto component manufacturers, Sunjay Kapur, president of the industry association ACMA, said that all segments of the vehicle industry, particularly the two-wheeler sector, are expected to perform well in 2022. “That being said, the strong global demand for Indian-made components and the push for electric vehicles have created several opportunities that component manufacturers can take advantage of,” he said.

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