Car sales in India to jump 8.5% in 2023: Moody's

Car sales in India are expected to climb 8.5% year-on-year in 2023 as increasing disposable income in the hands of the country's expanding working-age population aids higher spending on consumer durables such as cars, according to Moody's.

These strong growth prospects should produce a sustained increase in car sales to 6 million by the end of the decade — a compound annual growth rate of around 4%, the credit rating agency says in a report. "We expect car sales in India will climb 8.5% in 2023, with growth slowing to 3% in 2025," it says.

Moody's forecasts the profitability of automakers across the globe to come down from current record-high levels. "We expect tougher competition to cut into automakers' margins, which have reached record levels of nearly 9% in the last 12 months through September, much higher than the historical average of about 7%. The tougher competition is partly driven by slower global demand growth and increasing China exports. With global automotive supply chains being more robust now, we also expect automakers to become a bit more aggressive on pricing, while consumer affordability issues could lead to negative mix effects such as lower trims or smaller engines," the credit rating firm says. It predicts margins to come down to a comfortable level of 8% in 2024.

The transition to electric mobility recently lost some momentum, according to Moody's. The rating firm expects the share of battery electric vehicles (BEVs) to rise from 10% in 2022 to around 13% this year and about 16% in 2024. "This will be driven by continued new model launches and better product availability. Growth rates will, however, come down slightly after sales incentives expired in major markets (including China and Europe) at the end of last year, and because of weakening affordability in light of high vehicle prices and higher interest rates increasing financing costs. We also expect the greater share of BEVs will slightly dilute automakers' profit margins over the next 12-18 months," it says.

Moody's estimates China's auto sales to grow as much as 8% this year, 5% more than its earlier forecast of 3%. "If the 8% is achieved, Chinese auto sales will revisit their 2017 peak. The better-than-expected growth, however, is mainly driven by a 50% rise in exports. We expect Chinese domestic sales will grow only about 2.5%, largely in line with our prior overall auto sales growth forecast," the rating agency says.

The agency also raised its global light vehicle sales estimates by around 2% for this year and next, meaning it expects 87.9 million vehicles to be sold in 2023 (8.5% Y-o-Y) and 91.1 million in 2024 (3.7% Y-o-Y).

According to the Federation of Automobile Dealers Associations (FADA), passenger vehicle sales in India grew 17.19% year-on-year to cross the 3.6 lakh mark in November.