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Auto sector using more than 74% of capacity

BusinessAuto sector using more than 74% of capacity


Signalling a strong recovery, India’s automotive sector is utilizing, on average, more than 74 per cent of its capacity, which is higher than last year as reported, as reported by 70 per cent of respondents in a FICCI manufacturing survey. Almost all the respondents said that their production is higher in the July-September quarter of 2023-24 as compared to Q2 FY 2022-23. With regard to the orders, over 70 per cent of respondents reported higher order level for Q2 Jul-Sep 2023-24 compared to Q1 Apr-Jun 2023-24.

When it comes to capacity expansion, a similar percentage of the respondents reported that they are planning to expand capacity in the next six months. Low demand, especially for new technologies like EV and high interest rates are some of the factors that are still limiting some expansion plans for some of the respondents.

On the exports front, over 70 per cent of the respondents reported higher exports in Q2 FY 2023-24 over the same quarter last year. For over 70 per cent of the respondents, cost of production has risen. This is due to increased cost of the raw material, manpower, energy, power etc, the FICCI survey shows. All the respondents are reporting same average inventory levels in Q2 Jul-Sep FY 23-24 as in previous quarter. This is primarily because of shortage of containers.

About 57 per cent of the auto sector respondents are planning to expand their workforce in the near future. Some respondents are facing issues of non-availability of skilled manpower. On average, the industry reported to be availing credit at an interest rate close to 9.7 per cent per annum. All the respondents expressed that there is sufficient availability of funds from banks. Only 25 per cent of the respondents reported an increase in lending rate by the banks because of an increase in repo rates in the past. A little less than 15 per cent of respondents reported exceptionally strong growth (> 20 [er cent for the sector while over 85% per cent of the respondents expect moderate (5-10 per cent) to strong (10-20 per cent) growth for this sector.

According to the survey, industry has sought continuous check on inflation for reviving growth especially in rural India as well as export incentives and policies to boost domestic consumption through tax cuts / incentives, interest rate reduction to boost further growth in the sector. Capital investments and faster execution of Infrastructure projects, simplified e-way billing, subsidy for electric cycles and scooters and lower documentation and export related formalities.

Among other future growth drivers are lesser industry Interference by local authorities (DM, Collector etc.), compulsory online processing for all types of licences to increase accountability of the licensing authority.

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