Automobile companies will increase their capital expenditure by at least 30% to Rs 58,000 crore over the next two fiscal years to meet the rising demand as well as to meet the new regulatory requirements, says a report.
According to Crisil, passenger vehicle (PV) makers will account for about 70% of this Rs 58,000 crore additional capex, followed by commercial vehicle manufacturers at 20% and the balance by two-wheeler makers.
Anuj Sethi, senior director at Crisil, said about half of the Rs 58,000 crore will be to expand capacity to cater to growth in demand, and the balance for new products and technology to conform to tighter regulations. The OEM space is largely duopolistic with the top two players in each segment enjoying 60-70% market share.
The top two players in the PV segment, Maruti and Hyundai, are operating at close to optimal levels and are even resorting to lowering exports to meet domestic demand, while leading players in other segments are operating at utilisation levels of over 70-75%.
Vehicle demand is expected to grow in most segments in high single digits till fiscal 2020, supported by rising disposable incomes and increasing industrial and rural activity, Sethi added.