New Delhi, May 19 (KNN) Due to the significant increase in the sales, the revenues of domestic automobile dealership industry is likely to surge 11-13 per cent in the current fiscal, rating firm Icra said on Thursday.

The revenue growth this fiscal will be aided by expected 6-9 per cent volume growth and an increase in vehicle prices during the current financial year, it added.

The rating firm suggested that the sales in the consumer segment is expected to grow favourably due to factors like improving consumer sentiments, easing supply-side constraints, better features in the new product models, change in product-mix with increasing skew towards high-priced vehicles, etc.

In the commercial segment, improving economic activities, rising spends in infrastructure and mining activities, a stable financing environment shall support the growth, it added.

ICRA pointed out that potential headwinds could arise from adverse monsoons or the occurrence of the El Nino and its impact on rural demand, supply-related issues, general inflation, and further hardening in financing rates.

Segment-wise, demand for commercial vehicles is expected to be supported by replacement demand, pick-up in mining, infrastructure construction activities, and overall healthy fleet utilisation levels, it added.

In the passenger vehicle segment, underlying demand trends remain stable, although supply-chain related factors, increase in the cost of ownership, and monsoon performance are key monitorables, it stated.

Icra Assistant Vice-President and Sector Head - Corporate Ratings Nithya Debbadi said, "Factors like reduced waiting periods, an increase in operating costs amidst general inflation and competition, a rise in interest costs due to an increase in interest rates, and a rise in working capital loans amidst elevated inventory levels are expected to weigh on the margins in FY2024.”

Nevertheless, the industry's operating margins are expected to be better than the pre-Covid levels, she added.

The rating firm further noted that it expects inventory holding levels to increase as compared to the last two years, and normalise gradually to 40-45 days, going forward.  (KNN Bureau)