The domestic passenger vehicle (PV) industry growth will accelerate to 12% as against the earlier prediction of 9.5% in the current financial year owing to better than expected ramp-up in demand momentum particulary in the festive season. The growth in the last few months was also driven by low cost of ownership, payout of 7th Pay Commission, as well as normal monsoon after two consecutive deficient years of rainfall, said Icra in its latest report.
In the first six months of the financial year, the PV segment has already witnessed a growth of 12% at 14,94,039 units. Passenger vehicle sales in India are poised to cross the 3 million units milestone this financial year, as new models and compact SUVs serve pent-up demand from customers with better disposable incomes in both urban and rural areas. In the last financial year, 27,89,678 passenger vehicles were sold in the domestic market.
According Subrata Ray, senior group VP (corporate sector ratings), Icra, “The FY2017 performance will also benefit from the lower base of FY2016, as a majority of successful launches happened during H2FY2016 and hence didn’t contribute to the full-year volume. Given the low penetration levels in the country, the long-term prospects of the industry remain favourable. It is expected domestic PV sales growth to accelerate to 12% during FY2017 and maintains a 9%-10% CAGR estimate over the next five fiscals.”
The market share in the domestic PV segment is expected to remain concentrated over the medium term, with the top five players constituting over 80% of the overall market. This implies that profitability pressures on the relatively low volume players may be even higher, resulting in sustained dependence on external financing to fund losses and capital expenditure requirements. Nevertheless, players having low volume in the domestic market can leverage on labour arbitrage present in the Indian market and develop Indian facilities as an export hub for their small car requirement globally, the report further said.
During the April-September period, utility vehicles segment sales have grown by 40.24% at 3,73,504 units compared with 2,66,339 units in the same period of 2015-16. Car sales, on the other hand, grew by 5.11% to 10,26,526 units in the April-September period as against 976,586 units in the same period of the previous financial year.