India Inc’s auto sector deal activity declines

Primarily influenced by the private equity (PE) segment, India Inc saw 16 deals amounting to USD 98 million in Q2 2023 in the auto sector. According to the Grant Thornton Bharat Dealtracker Report, Q2 2023, there has been a substantial decline in overall deal activity, with a 92% decline in values and 36% decrease in volumes. 

21% Y-o-Y growth in domestic automobile sales

The automotive industry in India has entered a transformative phase, embracing alternative fuel technologies and innovative mobility solutions. The sector recorded a 21% Y-o-Y growth in domestic sales in FY 2022-23 across all vehicle categories and exhibited a strong presence within the EV sector, crossing the 1 million mark in sales and registering an exceptional 154% Y-o-Y increase this fiscal year.

Commenting on the findings, Saket Mehra, Partner and National Sector Leader Automotive Industry, Grant Thornton Bharat, said, “As India gears up to host COP28, and has assumed the G20 presidency, the country stands at a remarkable crossroads of opportunity. The projected investment opportunity (~$200 bn by 2030) within the EV sector alone highlights the drive for indigenous production, value chain integration, and customised solutions. 

Prospects in green hydrogen, clean energy, and mobility solutions attract immense investor interest, potentially creating a multi-billion-dollar market by 2030. The Indian automotive sector is poised to maintain a positive investment outlook in the medium-to-long term.”

The private equity (PE) landscape accounted for most of the deal activity. However, the PE trend experienced a decline of 20% in deal volumes and an 81% decline in values compared to Q2 2022. 

Persistent global macroeconomic factors, including inflationary pressures and heightened interest rates, further contributed to the overall decline in deal activity within the sector. Most of the PE activity was driven by the emergence and integration of advanced technology-aided business sectors such as Electric Vehicles, Mobility-as-a-Service, and Auto-components (mostly focused on EV components).

The global economic slowdown has significantly impacted the automotive sector, resulting in subdued movement, lower valuations, and overall reduced deal activity. Further, the second quarter experienced a lack of big-ticket transactions, impacting performance.

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