Despite lower sales, vehicle makers to post higher profit

CHENNAI: Even though vehicle makers would experience lower sales volume on a sequential basis in Q3FY23, they would nevertheless log higher revenue and profitability owing to the price hike, said Axis Securities in a research report.

According to the report, the vehicle makers are expected to post de-growth of revenue and net profit on a sequential basis due to the reduction in wholesales sales in December 2022 post-festive season due to the normalization of channel inventories.

On the demand scenario, Axis Securities said the commercial vehicles growth would continue with the government infrastructure push and replacement demand.

The passenger vehicles volume growth is expected to beat the FY19 peak of 3.4 million units owing to the launch of new models mainly in the utility vehicle segment.

The two wheeler internal combustion engine (ICE) demand growth will be contingent on the pick-up in the rural economy and export demand.

The peak FY19 two wheeler ICE sales of 21.3 Mn units now look difficult to surpass. On the other hand, the electric two wheeler segment is likely to continue witnessing growth in the coming quarter as it gains traction from urban and semi-urban consumers.

As per Vahan Data, electric two wheeler retails in CY22 stood at 62 per cent of total electric vehicle sales in India, followed by electric three wheelers at 34 per cent.

On the other hand, the electric passenger vehicle sales account for four per cent of the total electric vehicle marker.

Axis Securities said FY24 looks positive for the automobile sector though the market will be challenging as the pent-up demand of FY23 over the low base of FY22 subsides across segments.

Furthermore, real-time driving emission norms (from April 2023) and safety regulations related to six airbags from October 2023 and higher interest rates could pose additional challenges for automobile makers across segments as it will further increase the cost of acquisition of vehicles, Axis Securities said.