NEW DELHI: Passenger vehicle (PV) makers are likely to invest nearly Rs 65,000 crore by financial year 2025 to ramp up production capacities to cater to rising demand, rating agency Icra said on Monday.
It stated the demand for PVs has remained healthy and the industry wholesale volumes are expected to touch an all-time high of 3.7-3.8 million units in FY23, a growth of 21-24% over the previous fiscal.
Rohan Kanwar Gupta, vice-President & sector head - corporate ratings, ICRA, said, “Multiple original equipment manufacturers (OEMs) have already announced an aggregate outlay in excess of Rs 25,000 crore towards capacity expansion for the next few fiscals.
Besides capex, auto component manufacturers are also expected to scale up their investments to support their customers.” He added, “With OEMs budgeting for a substantial outlay towards new product development, including development of capabilities/dedicated platforms for electric vehicles, aggregate capex outlay for OEMs is likely to remain heightened at Rs 65,000 crore over FY2023-FY2025.”
While the capex outlay is likely to rise significantly, a majority of it will be met via healthy cash accruals and parent funding support, apart from inorganic fundraising in some of the recently formed EV subsidiaries. Thus, a rise in leverage is unlikely for most OEMs, and the credit profiles are expected to remain healthy. Significant investments announced by PV makers include Rs 7,000 crore by Maruti Suzuki in FY2023, Rs 7,900 crore by Mahindra & Mahindra over three years ending FY2024, Rs 6,725 by Tata Motors and Rs 4,000 crore by MG Motors.