MAHINDRA & MAHINDRA LTD. | Integrated Annual Report 2022-23

The softening of demand in the last three years is a result of tapering of GDP growth, shortage of semiconductors, loss of income due to COVID-19 in F20-21, increasing cost of ownership due to addition of multiple safety features and implementation of stricter emission norms during the last few years. The Indian auto industry is aware of the need for reducing dependence on imported oil, improving safety on the roads and most importantly, the need for clean air. Over the years, the industry has made signif icant investments in indigenisation of technologies in the conventional vehicles space where meeting BS-VI in 3 years is an example. In F23, the industry has implemented BS6.2 emission norms in the country. The Government of India (GOI) has notif ied Electric vehicle technology and Hydrogen fuel cell technology as advanced automotive technology under PLI (Production Linked Incentive) Scheme. The GOI's ambitious scheme to expedite the adoption of electric vehicles - Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME Phase II)-has been extended st by 2 years i.e. up to 31 March, 2024. 8.1% 10.1% 8.3% 7.3% 8.9% 3.6% -1.1% 1.2% -0.5% 0.7% PV (Domestic Sales) CV (Domestic Sales) Domestic Sales (Excl. 2W) PV (Export) CV (Export) Segment CAGR F09-F19 CAGR F19-F23 113 The Government of India has announced the PLI (Production Linked Incentive) Scheme for AAT (Advance Automotive Technologies) like battery electric vehicles and hydrogen fuel cell vehicles. Furthermore, with the objective of maximising local value addition and building competitiveness of the Indian industry, the Government has announced the Phased Manufacturing Plan (PMP). The Indian auto industry is making the necessary investments and is focused on building capabilities in the EV space. AUTO INDUSTRY IN FY 2022-23 In Financial Year 2022-23, the Indian auto industry has shown double digit growth across all segments. Passenger vehicles have reached new highest ever mark with 3.89million sales units while commercial vehicles are still below F19 levels by 4.5%. Indian auto industry sales (excluding two-wheelers) have recorded highest ever sales of 5.3 million units with 15.7%YoY growth. As a result, the industry volume of two-wheelers and three-wheelers are showing slower recovery and are still down by 25.1% and 30.3% compared to F19 levels. Over the ten years between F13 and F23, the Utility Vehicle (UV) segment has witnessed a good growth of 13.7% CAGR. UV, as share of PV, has increased from13.8% in F12 to 51.5% in F23. This growth in UV is driven by increased customer preference for UV- styled vehicles and a shift from compact cars to compact UVs (less than 4m length). In the last two years (F22 - F23), there were 18 new launches in the UV segment, and these accounted for 8% of UV volume in F22-23. For the year F23, compact UVs accounted for 50% of UV volume. Partial recovery of Auto Industry was principally a result of: Supply shortage of semiconductors in first half of F23. Rural recovery compared to pre-pandemic still needs time. We believe that electric vehicle adoption in India would be led by e-3W; the key drivers being improving operating economies, easy deployment for last/first mile connectivity (including at metro stations) and the growth of start- ups as 3W aggregators. For the year F23, a total of 65,059 e-3W were sold, accounting for 8.5% of the 3W industry.