April sizzles for passenger car segment

Two experts say the market hasn't peaked and the best is yet to come

Recent data released by industry body Society of Indian Automobile Manufacturers (SIAM) says that domestic passenger car sales grew by 18.4 per cent in April 2015, which is said to be the fastest sales growth in the last 30 months. While 1,59,548 cars were sold in the domestic market in April 2015, 1,35,054 cars were sold during the same period, a year ago.

Though the automobile industry is upbeat about it, experts opine that growth has not reached its peak. 

“If you look at growth in 2006-08, even 18 per cent is not at its peak. The last two years have been subdued. People took a healthy decision of not purchasing cars due to reasons like high fuel prices and inflation, among others. The high growth that we had in 2007-08 must come back. Also, with many new launches and low fuel prices, things seem to be slightly getting better,” industry expert and Price Waterhouse partner Abdul Majeed J Shaikh said.

SIAM deputy director general Sugato Sen said the industry had been decelerating. “We were not growing as per potential. Ours is not a matured economy, and we have not reached that level where the industry no longer grows. We have to see whether this growth of 18 per cent remains at the same level in future too,” he said.
Volumes from 2-wheelersIn the Indian vehicle market, the bulk of volumes come from two-wheelers. “Around 70-75 per cent of volumes come from two-wheelers alone. This is something unique in India. Apart from China, no other country has a huge two-wheeler market. If you take passenger vehicles, around 70-75 per cent were held by small cars. Globally, people prefer to have bigger vehicles, but in India, because of affordability and other factors, some of the popular small cars such as the Alto and Swift are top selling brands. The growth comes from these vehicles. If you take 1,000 people, only 15 to 16 people own a car in India, compared with 750 people in the US,” Shaikh said. 

He added that there is a lot of scope in growth in both the two-wheeler and passenger car segments. 
Steady growthTwo-wheelers have been seeing a steady growth since 2009-10. With 93,70,951 units sold in 2009-10, it is seeing a steady growth with sales at 1,60,04,581 in 2014-15.

According to SIAM data, the sales of passenger vehicles grew by 3.90 per cent in April 2014–March 2015 (FY 2015) over the same period last year. Within the passenger vehicles segment, passenger cars and utility vehicles grew by 4.99 per cent and 5.30 per cent respectively, while van sales declined by 10.19 per cent year-on-year. 

The overall commercial vehicle segment registered a de-growth of 2.83 per cent in FY 2015 as compared with the same period last year. While sales of commercial vehicles were 6,32,851 units in 2013-14, they were 6,14,961 in 2014-15.“The demand for both the two-wheelers and small cars has been growing in the rural pockets,” said Shaikh.  “Another unique feature about our country is that we purchase vehicles through financing. If interest rate goes up, people tend to stop buying immediately and they postpone purchase. While China sells 24 million vehicles annually, India’s market size is 3.5 million vehicles. There is huge growth in this industry and by 2020, we expect the market size to reach 6.6 to 7 million, nearly double that of the present,” he said.

High taxation irks the vehicle industry. For growth in this sector, taxation has to come down, feel experts. “There should not be more than two tax rates for cars,” said Sugato Sen.