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Passenger vehicle industry: India made four million cars in FY18

Business Standard:  April 16, 2018

New Delhi: It took the Indian passenger vehicle (PV) industry seven years to go from three million to four million in annual production. It produced and sold a record four million vehicles (cars, utility vehicles and vans) in the year ended March 31, 2018. The next milestone of five million vehicles might not take that long but is unlikely to happen by 2020, unlike some earlier forecasts.

Between March 2013 and March 2018, domestic PV production saw a compounded annual growth rate (CAGR) of 4.42 per cent. Assuming this rate stays for the next few years, it could take another five years to reach five million units.

The industry is more optimistic. That is because the CAGR in past three years has been 7.72 per cent.

R C Bhargava, chairman of Maruti Suzuki, said going from four to five million meant growth of 25 per cent and that cannot take place in two years. “We can expect to touch five million in three or four years. Double-digit annual growth is not happening in the domestic market at this point of time; it is reasonable to think of high single-digit growth. Disruption can come in the form of a surge in fuel prices,” he said.

The past seven years of an incremental one million units in production was marked by a year of decline (4.64 per cent in FY14) and another year of low growth (4.54 per cent in FY15). But for these two years, things could have been different. The earlier Automotive Mission Plan of the government (2006-2016) had set a target of four million PV production by 2016. It took two more years to do this.

Rakesh Srivastava, director of sales and marketing at Korean car maker Hyundai, said India could achieve five million units in production in three to four years. “The only challenge could be export demand on account of stress in some global markets,” he added. Export of PVs saw its first decline since FY11 in FY17. Shipments are down one per cent to 747,287 units. Exports account for almost a fifth of total sales. Its growth will play an important role in the road to five million units.

Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers, said it was difficult to predict the demand growth for cars, since this was linked to economic growth and income levels.

India was projected to become the third-largest PV market by 2020, according to estimates. It stood fifth in 2017 after China, the US, Japan and Germany. At 3.22 million units, local consumption in 2017 in India was not far from Germany’s 3.44 million sales. It is unlikely to bridge this gap in next two years, implying that India could be the fourth largest market, not the third, in 2020.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.