Passenger vehicle makers to spend Rs 65,000 cr on capacity expansion: Icra

Higher production is to cumulatively jack up overall capacity utilisation rate in PV industry to 74% by FY23-end from 59% in FY22

Passenger vehicle makers are expected to spend Rs 65,000 crore between FY23 and FY25, as companies ramp up outlay towards capacity expansion and new product development, credit rating agency Icra said on Monday. 

Better availability of semiconductors has helped companies ramp up production and improve capacity utilisation rate. The higher production is expected to cumulatively jack up overall capacity utilisation rate in the PV industry  to 74 per cent at the end of FY23 from 59 per cent in  FY22, it said. 

"Continuation of the healthy demand trend in the industry is expected to help keep capacity utilisation at comfortable levels (at about 70 per cent) over the medium term. The capex outlay for OEMs (original equipment manufacturers) is estimated to remain heightened (an estimated outlay of Rs 65,000 crore over FY2023-FY2025), with the OEMs budgeting for a substantial outlay towards new product development, including development of capabilities/platforms for electric vehicles," Icra said in a release. 

The estimate of a sharp jump in the capacity utilisation rate at the end of the ongoing fiscal is based on a quarterly uptick in production. It went up to 79 per cent at the end of the second quarter of 2022-23 from 57 per cent in the corresponding quarter of FY22, the highest in nine quarters.