Even as pent-up demand boosts car sales immediately in India, operations and sales are expected to stabilise only next year. A global semiconductor shortage and increase in input and shipping costs continue to pose challenges for automakers, MG Motor India said.
“While passenger vehicle sales are expected to gain pace in the coming months, there are 2-3 severe challenges impacting the industry,” Rajeev Chaba, President, MG Motor India, told ET. “The global shortage of semiconductors is likely to continue for some more time. Shipping rates have gone up, derailing production schedules and adding to costs.”
Material prices have climbed, affecting operations and cost structures.
“Prices of commodities – be they metals, copper or steel – have gone through the roof, creating artificial shortage of materials. This is putting pressure on operations,” Chaba said.
Operations are expected to stabilise only in the upcoming calendar year, he added.
Meanwhile, though sales in the passenger vehicle segment are expected to expand this year, the disruption on account of the second Covid wave is likely to drag down overall volumes.
“Passenger vehicle sales have declined nearly a third in the last two years. Earlier, the industry was expecting to grow by 35-40%, on a low base, and touch volumes seen in 2018. The second wave of the pandemic dashed these hopes. Volumes will still increase over last year but in the range of 17-20%”, said Chaba.
Passenger vehicle sales in the local market fell by 13% to 2.96 million units in 2019, and again by 18% to 2.43 million units in 2020. As many as 3.39 million passenger vehicles were sold in 2018.
However, with sales volumes hit adversely in the two months to June, vehicle purchases are expected to gain momentum in the next few weeks driven by pent-up demand. Chaba informed, “August onwards, we need to see more participation from fresh sets of consumers for sales to go up. A lot of people were affected by the second wave. If there are some confidence building measures in place, case load remains low, vaccinations go up, these people may convert and start making purchases.”
MG Motor India is ramping up production every month to meet potential demand. The company expects to outperform the market and grow by around 70-75% in CY2021. MG Motor India sold 28,162 cars in India in 2020, accounting for 1.2% market share and outselling carmakers like Volkswagen, Skoda, Nissan and FCA who have been present in the market for over a decade.
To boost volumes, the company is looking at launching a midsize SUV slated to hit roads in the fourth quarter of the calendar year. The new vehicle will compete with the likes of Hyundai Creta and Kia Seltos. Also on cards is a sub Rs 20 lakh electric vehicle, which is expected to be launched within the next two years.