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Rating agency ICRA has said that passenger vehicle makers are likely to invest around Rs 65,000 crore by FY25 to ramp up production capacities to cater to enhanced demand. It stated that the demand for passenger vehicles has remained healthy since the turn of the calendar year, aided by strong underlying demand and an easing up of semiconductor shortages.

According to the report, the passenger vehicle 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 per cent over the previous fiscal, driven by robust demand. It also said with ease in supply chain constraints and semiconductor shortage, capacity utilisation of the OEMs (Original Equipment Manufacturers) improved to healthy levels over the past few quarters -- factoring in a continuation of strong demand sentiments, the OEMs have now revved up their capacity expansion plans.

The report further said with the OEMs also budgeting for a substantial outlay towards new product development, including the development of capabilities/dedicated platforms for electric vehicles, the aggregate capex outlay for the OEMs is estimated to remain heightened at Rs 650 billion over FY2023-FY2025. It said multiple OEMs have already announced an aggregate outlay in excess of Rs 250 billion towards capacity expansion for the next few fiscals. It added that while adding new capacities will marginally moderate the capacity utilisation levels over the next few years, given the healthy demand environment, the utilisation is likely to remain at comfortable levels at around 70 per cent.