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Passenger car companies invest 65,000 cr in fiscal year 2025 to increase capacity: Report

Passenger vehicle manufacturers are expected to invest about $65,000 crore by fiscal 2025 to increase production capacity to meet soaring demand, ratings agency ICRA said on Monday.


Update on:
November 28, 2022, 16:14 pm

File images are used for illustrative purposes only (Bloomberg)
Image files are for illustrative purposes only (Bloomberg)

It claims that demand for passenger vehicles has remained good since the start of the calendar year, supported by strong underlying demand and easing semiconductor shortages.

The wholesale volume of the passenger vehicle industry is expected to reach an all-time high of 3.7-3.8 million units in fiscal year 2023, up 21-24% from the previous fiscal, driven by demand strong demand.

Also read: Indians bought almost twice as many cars in October compared to the festive month of 2021

With ease in supply chain constraints and semiconductor shortages, capacity utilization by OEMs (Original Equipment Manufacturers) has improved to good levels over the past few quarters — Taking into account the continuation of strong demand sentiment, OEMs have now adjusted their capacity expansion plans, ICRA said.

“With OEMs also budgeting a substantial amount of money for new product development, including the development of dedicated EV capabilities/platforms, the total investment cost for OEMs is covered. is estimated to continue to increase at $650 billion between 2023-2025,” said ICRA Vice President & Industry Director – Corporate Ratings – Rohan Kanwar Gupta.

Many OEMs have announced total excess funding $He added, 250 billion to expand capacity over the next few financial years.

Gupta notes: While the addition of new capacity will slightly reduce capacity utilization over the next few years, due to a healthy demand environment, utilization is likely to remain at a comfortable level about 70%.

ICRA notes that while investment spending is likely to increase significantly, much of it will be met through healthy cash accumulations and parent company funding support, in addition to fundraising. Inorganic capital activity in a number of recently established EV subsidiaries, ICRA noted.

First published date: November 28, 2022, 16:10 PM IST


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