CHENNAI: Automobile makers are expected to spend 30 per cent more in order to utilise the available capacity and scale up production, retain market share in the Indian market and meet BS-VI regulations, a report has revealed.
Capital expenditure by automobile Original Equipment Manufacturers (OEMs) comprising Commercial Vehicles (CVs), Passenger Vehicles (PVs) and two-wheelers, is set to increase to about `58,000 crore over the 2019 and 2020 fiscals, compared with the preceding two fiscals, ratings agency CRISIL said in a statement.
“About half of the Rs 58,000 crore would be to expand capacity to cater to growth in demand, and the balance for new products and technology to conform to tighter regulations. Vehicle demand is expected to grow in most segments in high single digits till 2020, supported by rising disposable incomes and increasing industrial and rural activity,” said Anuj Sethi, Senior Director, CRISIL Ratings.
The report, based on the study of 18 OEMs (of which 10 are rated by CRISIL) and covers about 90 per cent of current industry volume, indicates that PV makers will account for almost 70 per cent of this capex.
This will be supplemented by CV manufacturers with 20 per cent share and the rest by two-wheeler manufacturers.
The OEM space is largely duopolistic with the top two players in each segment enjoying about 60-70 per cent market share. The top two players are even resorting to lowering of exports to meet the domestic demand, the statement revealed.