K-shaped recovery in the Indian Automobile Industry!
Indian passenger vehicle (4-wheeler) segment is currently struggling on the supply side, due to the shortage of semiconductors across the globe. This has affected the sales of vehicles during peak festival season. But the good thing is, there is a good demand in the current scenario, and the future ahead, with a cautiously optimistic view. Overall recovery path is V-shaped in nature. This is largely driven by a shift in demand for personal mobility over shared mobility and also, some high income generating industries, either were less affected or recovered rapidly during prolonged COVID-19 induced pandemic.
India is the biggest 2-wheeler market in the world and in the year 2018, sales crossed the 2 crore mark. Unlike the 4-wheeler segment, the 2-wheeler demand has not shown a quick recovery in 2021. Demand has largely been subdued during the festival, harvesting, and marriage season of 2021, and the year-end result is largely going to remain flat. Also, semiconductor usage in 2-wheelers is not that high, compared to 4-wheeler, so the supply-side constraint is minimal. Slow recovery seems like an indication of rural economy distress. The overall recovery path will assume L-shape, by the end of 2021.
Both industry together in combined view appears to be having a K-shaped recovery. A K-shaped recovery occurs, when, recovery happens at different rates, times, or magnitudes. This really shows how divergent the Indian economy’s demand is in nature.
Electric vehicles adoption too will happen within the current market size perimeter only, with BEV (battery-electric-vehicle) substituting traditional ICE (internal-combustion-engine) vehicles. So, future passenger market expansion will happen largely with the recovery and future growth path of the Indian economy and its impact on the individual income growth trajectory.