CRISIL expects share of automatic transmission to increase to 40-45% by fiscal 2028

Hemal Thakkar, Senior Practice Leader and Director and Makarand Pathak, Senior Consultant, CRISIL Market Intelligence and Analytics explain why CRISIL expects the share of manual transmission in cars to drop to 55-60 percent by fiscal 2028, while automatic transmission's share is projected to increase to 40-45 percent.

By Hemal Thakkar and Makarand Pathak, CRISIL calendar 09 Jan 2024 Views icon1437 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
CRISIL expects share of automatic transmission to increase to 40-45% by fiscal 2028

Two significant shifts are underway in what — and how — Indians want to drive. Environmental concerns and stricter emission norms are prompting the reconfiguration of the powertrain mix towards compressed natural gas (CNG), hybrid and electric vehicles.

To boot, more cars are leaving the shop floor equipped with automatic transmission technologies. More consumers want ease of driving and can afford it. Both these trends are only likely to magnify in the next five years.

Diesel is dying in many environmentally conscious markets. Several OEMs have begun phasing out the dirty fuel variant as the change in emission norms to BSVI jacked up prices of diesel vehicles making them unviable.

The share of diesel vehicles has dropped quite steeply, from 40 percent in fiscal 2017 to 17.5 percent April-November 2023. Many customers, in fact, jumped to petrol, as the price differential narrowed, while diesel vehicle prices rose sharply when BSVI took effect.

Additionally, that triggered the rise of CNG variants. With its better-than-the-others cost economics, CNG powertrains have seen significant acceptance of late beyond the traditional commercial/taxi segment.

Availability of more options in higher trims and introduction of CNG powertrains in the utility vehicle segment has led to an increase in its share in domestic sales to 14.6 percent in April-November 2023, taking it very close to diesel’s share of 17.5 percent.

With increasing CNG supply (more CNG pumps being deployed on the ground), we are likely to see further proliferation of CNG powertrains.

As far as hybrid goes, recent launches, increasing awareness and environmental concerns have backed this segment’s growth. Maruti, Toyota and Honda have rolled out models in India earlier this year. We expect hybrid sales to comprise 1.5 percent of overall sales this fiscal, which will nevertheless be lower than the share of electric vehicles (2.5 percent).

In terms of power transmission (from engine to the wheels), the share of automatic transmission in all passenger vehicles has increased about three-fold in just five years. It rose from 8-10 percent in fiscal 2018 to 27-29 percent by fiscal 2023, by CRISIL’s estimates.

Automatic transmission technologies can, in turn, be automated manual transmission (AMT) or intelligent manual transmission (iMT). While fully automatic transmission variants include automatic transmission (AT), dual clutch transmission (DCT) and continuously variable transmission (CVT). All of these differ in terms of fuel efficiency, response time for gear shifting (driver experience), cost of acquisition and maintenance cost.

That said, Indian passenger vehicle sales are still dominated by manual transmission systems (71-73 percent of sales last fiscal). That’s because most buyers still tend to prioritise price over comfort.

However, exasperating traffic conditions, rising affordability, need for comfort and availability of semi-automatic transmission at affordable price points has led to a gaining share for AMT and iMT over the past five years. The two comprised 15-17 percent of sales in fiscal 2023.AMT and
iMT technologies are common in the affordable range (less than Rs 10 lakh) of passenger vehicles.

AT, CVT and DCT are preferred in the premium range and accounted for six to eight percent, four to six percent and one to three percent, respectively of domestic vehicle production in India as of fiscal 2023.

CRISIL’s market checks indicate that AT offers the best driving experience but is the costliest among competing technologies. It is most prevalent in premium and luxury passenger vehicles.

Overall, CRISIL expects the share of manual transmission to contract from 71-73 percent in fiscal 2023 to 55-60 percent by fiscal 2028 and that of automatic transmission to increase from 27-29 percent to 40-45 percent.

Frequent traffic snarls, increasing share of women drivers (who have a higher preference for automatic), increasing automatic options and affordability will drive this shift.In the affordable (Rs 6-10 lakh) range of vehicles such as Alto, WagonR, S Presso, Kwid, Celerio, Swift, and Grand i10 Nios, and mid-range vehicles like Altroz, Baleno, i20 N-line, Glanza, Exter, Punch (Rs 10-20 lakh), AMT and iMT are likely to emerge as the technologies of choice due to price affordability.

In premium priced vehicles (over Rs 20 lakh), AT is likely to be the technology of choice, with a preference for DCT over CVT due to affordability and performance. But CVT technology has been introduced in the premium hatchback segment that is gaining popularity, supporting expansion of this technology.

AT and DCT are expected to get a push from a low base, rising preference for premiumisation, superior driving and increasing options in the domestic market. Increasing localisation, and in turn, competitive pricing for these technologies are expected to provide an added boost.

This interview was first published in Autocar Professional's December 15, 2023 issue.

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