Posted on 12 May 2022
India's automobile production was steady in April as supply-side challenges continued to plague the sector, and although sales improved, the central bank's recent repo rate hike is expected to weigh on demand.
India's automobile sales in April rose by 12pc on the year to 1.42mn units, while production remained little changed at 1.87mn, according to the Society of Indian Automobile Manufacturers (Siam). But sales and output dropped by 5pc and 4pc against the previous month, respectively.
"Supply-side challenges continue for the industry… manufacturers are also monitoring the likely impact on demand, due to the recent hike in repo rates, as it would increase the lending rates to the customers," Siam director-general Rajesh Menon said.
A lack of semiconductor chips, a key electrical component in automobiles, has continued to hurt the global auto industry since pandemic-related supply chain issues emerged two years ago. The slowdown in the automobile sector has also weighed on domestic steel demand. The Indian steel industry receives 8-10pc of its demand from the auto sector.
The Reserve Bank of India last week announced an increase in repo rates by 40 basis points, in a surprise move to curb inflation. The move will make vehicle loans more expensive and pressure the already-struggling auto industry, according to India's Federation of Automobile Dealers Associations (Fada).
Total auto sales by dealers across the country stood at 1.63mn units in April, rising by 37pc from a year ago and by 1pc on the month, Fada data showed.
The Russia-Ukraine conflict and Covid-19 lockdowns in China will further exacerbate the high metal prices and container shortages, and keep any recovery in the auto sector limited, Fada said. But increasing private consumption, along with a normal monsoon forecast and the upcoming marriage season in the country should boost auto demand, it added.
Source:Argus Media
