Prospects of a better monsoon, new product launches and salary hike to government employees will provide a one-time demand boost to all automobile segments in the country, according to global rating firm Fitch.
With expectations of better monsoon rains in 2016-17 and new model launches intensifying competition in the passenger and two-wheeler segments Fitch believes replacement demand will increase supporting commercial vehicle demand, it added.
“In addition, a 23.5 per cent salary hike for government employees, effective in 2016, will provide a one-time demand boost to all automobile segments,” Fitch said in its report.
Besides, lower ownership costs due to falling fuel prices and expectations that India will maintain GDP growth of around 7.5 per cent over the financial year to end-March 2017 (FY17) underpin Fitch’s stable outlook for India’s automobile sector, it added.
The global rating firm said that robust macroeconomic expansion in the last fiscal led to a 7.2 per cent growth in the Indian domestic passenger vehicle sales to 2.8 million units.
Commercial vehicle sales, which were also boosted by a revival in the mining sector, increased 11.5 per cent.
Three-wheeler segment grew by a modest 1 per cent while the two-wheeler segment by 3 per cent during the last fiscal as rural demand was adversely affected by a poor monsoon.
The Indian automobile industry primarily caters to the domestic market, which accounted for 85 per cent of total vehicle sales in 2015-16, while exports accounted for the balance.