India's auto sector weathers Ukraine crisis, pandemic

E-cars likely trump card for 2024


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An automobile factory in India. One of the major drivers of the EV market in India is the government's push towards electric mobility. - File photo
An automobile factory in India. One of the major drivers of the EV market in India is the government's push towards electric mobility. - File photo

Published: Fri 30 Dec 2022, 3:44 PM

In 2022, India's automobile industry and the production in the sector slowed down due to supply chain disruptions. With the pandemic and a microchip crisis emerging in 2020, the industry was hit hard and the supply went down.

Around the same time, the government had also taken up initiatives to promote the production of electric vehicles (EVs).

One of the major drivers of the EV market in India is the government's push towards electric mobility. In October 2021, the government set a target of having 30 per cent of all vehicles on Indian roads to be electric by 2030. To achieve this, the government implemented various measures such as providing subsidies and tax exemptions on electric vehicles and charging infrastructure, setting up charging stations, and launching the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME India) scheme to promote the adoption of EVs.

Union Minister Nitin Gadkari had said if electric vehicles expand to 40 per cent in the two-wheeler and car segments and close to 100 per cent for buses by 2030, India would be able to reduce crude oil consumption by 156 million tonnes, worth Rs 3.5 trillion.

Another factor contributing to the growth of EVs in India is the availability of affordable options. In the past, EVs were seen as expensive and luxury vehicles, but now, several Indian automakers are launching EVs at prices that are competitive with traditional fuel-powered vehicles.

For example, Tata Motors and Mahindra and Mahindra have launched EVs in the price range of Rs 1-1.5 million, making them accessible to a larger segment.

Technological upgrades like the Internet of Things and autonomous driving slowly emerged in 2022, along with electrical vehicles fitted with the latest automotive technology. To explain it in simple terms, IoT solutions constantly monitor vehicle conditions to predict potential issues. IoT sensors gather real-time data on fuel consumption, engine temperature, fluid levels, run time, etc. This data is then analysed to detect pre-failure conditions and alert the driver in advance.

In addition to government policies and affordable options, the increasing awareness about the environmental impact of transportation is also driving the demand for EVs. As people become more aware of the negative impact of fossil fuels on the environment, they are increasingly opting for clean and green transportation options such as EVs.

Saurav Kumar, Founder, and Chief Executive Officer, Euler Motors, said, "2022 has shown that EVs are the future of mobility. There is demand and customer willingness towards an electric transition across spaces - retail and institutional in every segment category, be it two-wheelers or commercial. The right product at the right value and at the right time will be a vital proposition that will drive the industry forward."

"The ever-expanding demand now is pushing the industry towards efficient mass production, and market rollout to achieve economies of scale. This can be solved through more government initiatives that push for localising EV components and system technologies across the cell, electronics, and aluminium extrusions; push OEMs (original equipment manufacturers) to also cut down imports, build sustainable transition plans, and introduce more stringent testing standards to maintain component quality and performance," he added.

On the other side, industry body Siam said if you look at historical data, passenger vehicles in April - November in 2022 had seen the highest-ever sales.

It might have happened because as Covid restrictions ebbed, the pent-up demand and better conditions with the supply chains might have pushed up the huge demand.

Sundeep Sundli, Director for Trade Fairs, Society of Indian Automobile Manufacturers (Siam) said, "Though passenger vehicle industry has hit the peak in 2022, commercial vehicles, two-wheelers and three-wheelers are yet to cross the 2018-19 peak of the industry achieved during pre-Covid."

Sundli added while the domestic market growth for commercial vehicles remains strong and is likely to exceed the previous peak in the next 1-2 years, there is of course an apprehension that increase in interest rates in India and higher costs for consumers could affect the growth trends, going forward.

Speaking on the long wait on order of cars prevalent now, Sundli said that pent-up demand, which accumulated due to Covid in 2020 and 2021, could not be met soon as shortages in the supply chain cropped up which was severe till the middle of 2022.

He said companies were doing their best to meet the market demand now, though the issue of semiconductor shortage was not fully behind.

"There are also several headwinds as mentioned earlier which could be of concern going forward for the overall economy, which might then impact the demand. It is expected that the wait list would gradually come down, as it has fairly improved for many of the vehicle models," he added.

Talking on challenges with supply constraints, Sundli said the Ukraine conflict from February 2022 disrupted supply chains further and increase cost of fuel and certain commodities. As inflation continued to rise, interest rates were hiked with the impact on rates for vehicle financing.

He also added the government undertook significant measures by reducing the excise duty on petrol and diesel, and also altering the duty structure to rationalise the cost of steel and plastics for the auto industry.

With an eye on future, Sundli said Siam sees risks from a potential global slowdown and higher interest rates in India. These may also impact the Indian auto sector.

Vivek Vikram Singh, Managing Director and Group CEO, Sona Comstar, said, "The year 2022 was challenging for the global automotive industry, given the supply chain disruptions and high commodity prices. Despite these challenges, Sona Comstar delivered its highest quarterly revenue, Ebitda , and net profit in the recent quarter, demonstrating our solid, resilient, diversified, and low-fixed-cost business model.

He said 2022 had been their best year for new product development. "We introduced three driveline products and have transmission solutions for all BEV (battery electric vehicle) architectures. In electric drive motors, we crossed an important milestone of manufacturing over 100,000 motors, thus establishing Sona Comstar as the leading supplier of traction motors to the electric two-wheelers industry," Vivek Vikram Singh said.

Sona Comstar has made significant headways in the EV space, as BEVs contribute a quarter of our revenue, he highlighted.

"We are working on 37 EV programmes for 23 customers across all major automotive markets. We continue to invest in R and D, which has helped us become global technology leaders in our core product segments," the MD said.

The year 2022 was a tough year for the automobile industry because of supply chain constraints and Ukraine crisis which jacked up fuel prices in the country and around the world. However, experts echoed the sentiment that the business environment of the sector was definitely looking up. The year 2023 will be favourable for the industry as it shifts gears of fuel from fossil energy to electric.

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