A record 3 million passenger vehicles may get sold in FY17

High single to double digit growth likely after a wait of 5 years

The passenger vehicle (cars, utility vehicle and vans) industry’s domestic volumes have grown at 9.23 per cent in the first four months of FY17 (against 7.46 per cent same period last year), raising hopes of a full year double digit growth after a long gap of five years (FY11 saw 28 per cent growth). The 9.23 per cent growth will get a further push for at least next three-four months as festive demand season will start with Onam in September and last till November.  

The industry sold a record 2.78 million passenger vehicles in FY16 and so a double digit or even high single digit growth on top of that means approximately 3 million vehicles will be sold this year. This growth will come in spite of the regulatory concerns around diesel vehicles.

What is driving this optimism?

The key growth triggers for this year are an above normal monsoon (after two consecutive deficit years) and increased wages of government employees under Seventh Pay Commission. Other positives are moderating fuel prices and stable car loan interest rates. 

Who will lead this growth?

Market leaders Maruti Suzuki (47 per cent share) and Hyundai (17.2 per cent share) are expected to lead growth by posting double digit growth this year. Maruti, which is facing a capacity constraint, will see production coming from its new plant in Gujarat early next year and it will add to volumes. Others like M&M and Renault will also add significant volumes.

The concerns

The immediate concern is in form of regulatory actions against diesel cars. In December 2015, the Supreme Court imposed a ban on sales of diesel vehicles with engine capacity of 2,000cc and above in the national capital region. This has moved buyers away from diesel cars. The National Green Tribunal has also acted against 15 year old diesel vehicles. The gap between petrol and diesel has also narrowed and left limited incentive for price conscious car buyers.