India's passenger vehicle sales hit record high in FY23

India’s passenger vehicle sales hit a record high in the fiscal year 2022-23, as chip shortages eased and customers shelled out more money for sport utility vehicles (SUVs), an auto industry body said on Thursday.

Automakers have sharpened their focus on producing SUVs, driven by consumer demand despite inflation trending higher through the year. Meanwhile, sales of entry-level vehicles continued to see challenges.

Sales of SUVs, which made up more than 50% of total passenger vehicle sales in the year, was “much higher than expected”, Society of Indian Automobile Manufacturers (SIAM) president Vinod Aggarwal said.

“Global recessionary concerns have eased,” Aggarwal said, adding that he expects the Indian auto industry to perform well in 2023-24 if the economy remains strong and monsoons are good.

Passenger vehicle volumes for the year rose nearly 27% to 3.9 million units in the year ended March 31, SIAM, which records sales to dealers, said. Sales of utility vehicles stood at over 2 million.

Buying ahead of implementation of new fuel emission norms, and strong demand during the festival season also drove sales towards the end of the year.

Two-wheeler sales, an indicator of the financial health of India’s lower- to middle-income households, also rose 16.9%.

However, sales of small entry-level cars fell 57% to 252,000 in the last fiscal year from its 2016-17 peak of 583,000 units.

New emission regulations have pushed up the cost of manufacturing entry-level vehicles, increasing the cost for consumers, Aggarwal said.

Earlier this month, the Federation of Automobile Dealers Associations (FADA), which publishes retail sales data, said growth is expected to taper to a low single-digit percentage in the current fiscal, mainly due to inflation, price hikes by carmakers and regulatory changes.

India’s annual retail inflation eased to 5.66% in March from 6.44% the previous month, government data showed on Wednesday.

Automakers such as Maruti Suzuki India Ltd (MRTI.NS) and Hero MotoCorp Ltd (HROM.NS) have hiked prices to offset higher input costs due to inflation and new safety and emission norms.