TN, Rajasthan hold growth potential in auto sector

Written by feBureau | Chennai | Updated: Apr 4 2013, 06:47am hrs
Tamil Nadu and Rajasthan can provide the highest growth potential for the automobile industry in adding new and first-time customers. The states registered a high growth in employment generation, per capita income and monthly per capita consumption expenditure share in durable goods and are ahead of the national growth in the three key indicators i.e. income, employment and expenditure across 20 major states of India, said Assocham.

In its latest study on Automobile industry in India: Saturated & potential states, the chamber said, while, the all-India compounded annual growth rate (CAGR) of employment generation was about 3.7% between 2000-01 and 2007-08, the same in Rajasthan was about 6.8% and in Tamil Nadu was 4.4%. Various other states with an employment generation growth rate more than national level are Uttarakhand (17%), Himachal Pradesh (13.5%), Jammu and Kashmir (12.4%), Haryana (7.8%), Chhatisgarh (7%), Karnataka (6.2%), Punjab (6.1%), Odisha (5.3%), Uttar Pradesh (4.7%) and Gujarat (4.7%).

Besides, Tamil Nadus GDP and motor vehicles registration growth are also more than the national level growth, said DS Rawat, secretary general of Assocham.

Increasing population, rising purchasing power, growing auto finance market, increasing distribution network, prospering rural markets, impact of inflow of FDI in Indian automobile sector are certain key factors that are driving the automobile production and domestic automobile sales which are growing at a annual growth rate of over 13% and 12%, respectively and have clocked over 2 crore and 1.7 crore numbers as of 2011-12.

With the car density per 1,000 population in India being lower than other BRICS (Brazil, India, China, South Africa) economies, it provides an opportunity for India four wheeler manufacturers thereby providing them with a potentially large untapped market. Lack of infrastructure, geographical challenges and population density are certain constraints faced by automotive companies to expand their presence in rural markets, the study said.