Declining auto exports: Time for a gear shift?

India’s exports of vehicles declined across segments with the exception of passenger vehicles in 2022-23. While factors like global macroeconomic environment and dollar strength are cyclical, one clear reality that India needs to be cognisant of is the growing share of EVs in automotive exports and consequent decline in ICE-based vehicles. This trend merits a timely shift in capabilities with the goal of making India an EV manufacturing hub. But will India be able to catch the bus in time? 

auto export

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New Delhi, April 20: The auto industry in India has made a splendid comeback in the domestic market after the past few tumultuous years. In 2022-23, domestic sales of passenger vehicles saw a growth of 15%, and growth was in fact witnessed in nearly all segments. However, according to latest auto figures, released by different companies, exports of both four-wheelers and two-wheelers shrunk in FY23.

The Society of Indian Automobile Manufacturers (SIAM), in its latest report, mentions the growth of domestic sales and the decline in exports. The apex auto association has observed that in FY23, total domestic sales stood at 2,14,04,162 units, as compared to 1,76,17,606 units in the previous FY.

India’s auto exports hit a speed bump

India’s total exports of vehicles for FY 2022-23 stood at 47,61,487 units, a decline by 15% YoY. While exports of passenger vehicles have gone up by 15%, commercial vehicles recorded a decline by 15% YoY. The three-wheeler auto segment sold 365,549 units in the last fiscal year, a dip of 27% YoY. SIAM’s report records that cumulatively, only passenger vehicle segments are clocked a positive trend. The two-wheeler segment witnessed a decline by 18%. It can be noted that while overall exports dipped, some auto brands managed to increase their export size.

Under the PV segment, Honda, Hyundai and Isuzu recorded growth in exports in FY 2022-23 with sale increase of 18%, 18% and 27% respectively. Other PV manufacturers such as Toyota, Renault, Nissan, Maruti, Mahindra & Mahindra and Kia also saw an increase in exports. But Volkswagen, Ford, Force Motors and MG Motors recorded a decline in international sales. The overall figures, though do look positive, given that the exit of Ford from India has significantly impacted PV export figures.

The auto company exited from the country in 2021, though, it reconsidered its decision to re-enter India in February 2022, after securing PLI scheme benefits. Three months later, the American auto brand once again announced its decision to give up on the project to make electric vehicles for exports.

The major reason for the decline in sales is seen as the resurgent dollar leading to devaluation of currencies in some of the key export markets. Speaking to IBT exclusively, SIAM President Vinod Aggarwal said:

“They (export figures) will resolve in any way because we as industry leaders are very optimistic. Even if the export numbers are down, we are confident that they will pick up. We are not saying that things are gone. But it will take time to rebound.”

Talking about foreign exchange, the SIAM president believes that leveraging the option of rupee trade may give due export advantage to the country. He also added that the FTAs with UAE and Australia could positively impact India’s auto exports.

Brands’ performance outshines industry output

Some of the biggest two-wheelers manufacturers such as Chetak, Hero Motocorp, Honda, Piaggio and TVS Motor took a dive in international sales. On the other hand, Yamaha, Royal-Enfield and Suzuki Motorcycle emerged as top gainers with sales of 274,986, 100,055 and 207,615 units respectively in the last financial year.

The country’s auto export figures have been affected largely by the threat of global recession which visibly slowed economic capacities along with purchasing power of developed economies.

India Auto Exports

Data Source:

While China is recuperating from its endemic situation, India emerged as a major auto exporter, as the share of vehicle sales increased to the US, UAE, Singapore, Israel, Germany, Spain and Russia. In January 2023, it was reported that India overtook Japan to become the world’s third-largest vehicle market. Production and demand within Japan took a beating in 2022 and have been on the decline even in preceding years.

EVs – the new arena for automotive dominance?

India still faces tough competition from China. The China Association of Automobile Manufacturers reported that the country shipped 3.11 million vehicles to foreign countries in 2022. Export figures were significantly more than Germany, previously the second-largest exporter, which sold only 2.61 million vehicles in international markets in 2022.

China is also advancing in auto sales in the international market with the increase in preference for sustainable cars and electric vehicles. In 2022, China exported around 679,000 new energy vehicles (NEVs, an umbrella term that China gives to fully electric and PHEV cars), an increase of about 120% YoY. India’s export share of EVs remains less than 1%, while for China, they have become a driving factor for export growth. India, on the other hand, is struggling with EV sales in its domestic market itself, wherein the 2-wheeler EV adoption was 25% short of the target laid out by NITI Aayog and other research organisations. Society for Manufacturing of Electric Vehicles has attributed this to the subsidies worth Rs 1,200 crore that were withheld because of ‘delay in localisation’.

The share of electric vehicles is rising globally at a very brisk pace. According to a report by International Energy Agency, global sales of electric cars rose by 6o% in 2022, and crossed 10 million for the first time. Now, one in every seven cars sold is an EV, as compared to one in seventy cars in 2017. Sales of conventional cars in fact fell by around 25%.

Even as it addresses the short term volatilities in the international car market, India needs to aggressively pitch itself in the EV space now. Doing this will firstly require, as affirmed in a report by Arthur D. Little, investments of at least US$ 10 billion to boost cell manufacturing and raw materials refining. This minimum amount is required to just service the local demand of Li ion batteries. Currently, around 70% of this requirement is sourced from China. Local Indian firms also need to secure global partnerships and JVs to boost capabilities and ensure a robust supply chain with access to critical raw materials like lithium, nickel, cobalt and manganese. As the arena shifts, India needs to shift too, and fast!

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