Mark Fulthorpe is the global director of Light Vehicle Production Forecast for IHS Markit Automotive. He currently leads a team of analysts based in North America, South America, Europe, Japan/Korea, China, Thailand and India. He has more than 15 years of experience following developments in the production environment. Mr Fulthorpe shares with FE how the recent demonetisation step is going to impact the Indian light vehicle four-wheeler market, including passenger and light commercial vehicles. Excerpts:

What will be the impact of demonetisation on Indian automotive industry?

Following the initial analysis of demonetisation, we have cut the forecast for calendar year 2017. The major effects are expected to come in the first quarter of 2017, but we expect the recovery will start in the second quarter and gain momentum in the third and fourth quarters.

However, the volumes lost in the first quarter appear difficult to recover throughout the remainder of 2017. We expect the majority of manufacturers will feel the heat during the first quarter of 2017. But demonetisation, we believe, is a micro factor.

What are the estimates for calendar year 2017?

We expect the Indian light vehicle market, including passenger and light commercial vehicles, to register 4.34 million production in 2017 (up 5.2% year-on-year), down from our earlier estimation of 4.46 million vehicles (7.75% year-on-year growth).

What is your outlook for Indian light vehicle manufacturing?

The size of India’s population, increasing urbanisation, infrastructure which is getting better, a stable government, a more robust and simpler taxation structure including GST … all these are strong fundamentals and will lead to higher demand for light vehicles. Demonetisation, as I said, is a micro factor that will not negatively affect light vehicle sales growth in the long run.

By when can India overtake Germany in light vehicle production?

In the short-term, India is not likely to overtake Germany as far as production is concerned. Germany produces about 5 million units a year.

However, in the long-term, India is sure to grow bigger. The reason is that German manufacturing capability is pretty settled today and German manufacturers may not want to invest more in growing their capacity within the country. They are already looking at regions like China and North America. India will remain a recipient of investment for a long time and, by the middle of or late next decade, the market could grow to 7 million units per year or more.