According to a recent report by credit rating agency Crisil, the passenger vehicle (PV) segment is poised for significant growth in the upcoming fiscal year, propelled by the remarkable surge in demand for Sport Utility Vehicles (SUVs). This surge in popularity has seen SUVs doubling their market share to a staggering 60%, up from 28% pre-pandemic levels in fiscal year 2019. Crisil predicts a 5-7% increase in PV volumes for the next fiscal year, marking a third consecutive peak in growth.

The remarkable growth in the SUV segment is expected to outpace overall PV volume growth, reaching over 12%. This surge is attributed to several factors, including the introduction of new model launches, including electric variants, and improved semiconductor availability, addressing supply chain challenges. Despite potential challenges such as weaknesses in the rural market and reduced affordability at the entry-level, the SUV segment is projected to maintain its momentum.

Crisil highlights the remarkable performance of the SUV segment, with higher realizations, stable commodity prices, and prior price hikes contributing to expanded operating margins. This fiscal year has witnessed a notable increase of 200 basis points in operating margins to around 11%, with the potential for further growth to 11.5%-12.5% in the next fiscal year.

While PV exports have experienced a slight slowdown, Crisil expects this trend to persist. Despite substantial capital expenditure of approximately US$ 5.3 billion (Rs. 44,000 crore) in fiscal years 2024 and 2025 to meet the strong demand for SUVs, PV makers maintain stable credit profiles. This is attributed to healthy cash accrual and surplus, ensuring minimal reliance on external borrowings and positioning the industry for continued growth and stability.

In conclusion, Crisil's forecast underscores the robust growth potential of the SUV segment within the passenger vehicle market. With SUVs driving demand and innovation in the automotive industry, stakeholders can anticipate continued momentum and evolution in the coming fiscal year.