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Auto sector continues to reel under pressure in meeting volumes due to prolonged chip shortage crisis. According to a report by CARE Ratings, auto sales were mixed as two-wheeler sales grew marginally by 7.6% year-on-year, while three wheeler sales grew by about 30% month-on-month due to low base. Sales of tractor declined 17.6% on a monthly basis due to seasonality factor.
The semi-conductor shortage has been a unique and ongoing challenge for not just the Indian passenger vehicle industry, but for global players. For nearly 10 months now, the passenger vehicle manufacturers across all nations are facing this hurdle and hence their production levels are being adversely hit.
The report said that medium and heavy commercial vehicles are witnessing some traction in specific geographies as the government is rolling out infrastructure projects in those locations.
Meanwhile, domestic original equipment manufacturers (OEMs) continue to adjust their production due to global auto industry affected by the semi-conductor shortage and deteriorating situation in east Asia due to lockdowns, according to rating agency Ind-Ra report.
The report also said the passenger vehicles sales is likely to decline further in September, as Maruti Suzuki has announced about 60% lower than normal production for the month.
CARE Ratings noted in its report that OEMs across the automobile industry is expected to face the production headwinds due to shortage of containers and higher metal prices. As a result, customers are likely to see no discount schemes during the festive season, which may limit demand. In addition, rising fuel prices may dampen consumer sentiments.
However, Nifty Auto index is on an upward trajectory, according to the technical charts. The share prices are expected to rise in the near-term on hopes that sales will improve as auto loans have been slashed by Indian banks ahead of the festive season and some positive comments by companies regarding the chip issue.