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Light vehicles keep India on fast track

Light vehicles keep India on fast track

Mumbai, January 1, 2019:  India has kept its position as the fastest growing among the top five markets for light vehicles in 2018, a year when a weak China is expected to have pulled the global automotive industry into its first recession in a decade.

Automotive forecasting firm IHS Markit said that the Indian market is estimated to have grown 8.6% to about 4 million units in the past years. Among the other top markets, it expects China and Germany to report a fall in output, and the US and China to post flat numbers.

India has held on to the pole position for at least two years now, despite the local market facing an adverse macroeconomic environment of rising finance and insurance cost, and uncertain fuel prices. In 2017, the market had expanded at a marginally slower pace of 8.2%. Light vehicles include cars, utility vehicles, vans and pickup trucks.

Gaurav Vangaal, senior analyst for forecasting at IHS Markit, said such sustained strong growth would give confidence to global majors to remain focused to India, especially at a time when they are facing headwinds in other markets. In December, Bloomberg News, citing RBC Capital Markets, reported that the global automotive industry was heading to its first decline in output since 2009. “The inherent structural demand of the Indian market helped vehicle makers overcome multiple challenges right from a spike in tariff, hike in interest rates and rupee depreciation,” Vangaal said.

While the forecast for 2019 is yet to be released, IHS Markit had earlier predicted India to break into the top three markets for light vehicles by 2021, overtaking Japan with sales of about 5 million units. Definitely, the growth in India is slower than in two other BRICS markets, Russia and Brazil, where sales are estimated to have grown 12-14% in 2018. The two markets, though, are much smaller than India in terms of sales volume.

N Raja, deputy managing director of Toyota Kirloskar, said growth in GDP and a young demographic would continue to drive motorisation in the coming decades in India. “India can expect the motorisation to further speed up once the per capita income crosses $5,000, as seen in market like China. Yes, urban markets have seen a slowdown, but rural demand will be the key driving force in the future,” added Raja.

In order to tap into this growth opportunity, Toyota Motor had entered into a partnership with Suzuki Motor to have a wider and a deeper presence in the Indian market. The benefits of this partnership will start translating starting 2019 for Japan’s largest car maker Toyota. Ford Motor, which recently stitched a partnership with homegrown utility vehicle maker Mahindra & Mahindra, believes India with its young population, growing affluence, economy and infrastructure has the potential to be among the top two automotive markets by 2030.

Anurag Mehrotra, managing director of Ford India said, “With a car penetration of 25 per 1,000 people, India clearly is under-penetrated, and has the potential of delivering a 10%-plus CAGR over a 10-year horizon despite short-term headwinds. The future growth in India will also depend on how we as automotive industry respond to changing consumer’s mobility needs in the wake of growing urbanisation and congestion”.

While several of the developed economies witnessing growth saturation and emerging markets like Brazil, Russia and Mexico facing their unique domestic challenges, India has been the only market delivering sustained growth. To tap into this opportunity, the likes of Kia, Groupe PSA and Shanghai Automotive are entering India in the coming two years, even as existing global automakers are hoping to grab a larger pie of this growing market where Maruti Suzuki and Hyundai Motor together account for two thirds of passenger vehicle sales.