Speed breakers such as the third COVID-19 wave triggered via the spread of the Omicron variant in India as well as rising commodity prices might decelerate the automobile industry's recovery.
India's automobile industry expects a continuation of healthy demand along with the easing of semiconductor supply issues during the upcoming year. However, rising commodity costs have driven up automobile prices. Similarly, the semiconductor shortage has extended the waiting period along with escalated prices. At present, semiconductors play a critical part in the production of internal combustion engines. They are an integral part of all kinds of sensors and controls in any vehicle.
According to Tanu Sharma, Director Ratings at Brickwork Ratings, passenger vehicles revenue growth estimates of BWR may be revised downwards to 15% for 2022 in the backdrop of more severe semiconductor chip shortages impacting deliveries and muted festive season sales. He said that, due to rising commodity prices, and rising fuel prices, vehicle price hikes will be inevitable and pose a challenge of the high cost of ownership to buyers in the medium term.
Sridhar V., Partner, Grant Thornton Bharat LLP said that, the auto sector looks at 2022 with optimism despite several challenges faced by it in the form of chip shortage, Omicron, price increase of input materials. The kickstart of the PLI scheme by the government with clear directional indicators supported by measures under FAME, introduction of scrappage policy, uptick in demand, positive sentiments and overall economic growth indicators should strengthen the optimism. Chip shortage is expected to ease out in the near term to keep pace with the demand expectations. He added that 2022 is expected to be a year of awakening for the industry.
Source: ET Auto.com
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