Domestic car market to be back on top gear soon, says study

Domestic passenger car market which hit a rough patch after clocking record sales in 2010, is likely to bounce back soon riding on fundamental drivers of the market, said Deloitte.

The Deloitte report titled ‘Driving through BRIC markets – Lessons for Indian car manufacturers' analysing the impact of macro-economic conditions in similar growth markets, has observed fundamental factors like upward income migration of households, increasing urbanisation and an expected lower interest rate scenario will boost car sales in India.

“The current slowdown is not here to stay as the fundamentals of car sales growth namely, urbansiation and car density are still very attractive,” said Kumar Kandaswami, senior director at Deloitte Touche Tohmatsu India

It was observed that per capita disposable income (PCDI), urbanisation and car density have been the top three indicators of car sales growth in India.

“While the latter two have remained attractive, ‘real’ PCDI growth has slowed down in 2011 in context of persistently high inflation. If inflation were to be curbed or disposable income were to grow faster, India holds a higher chance than most of its BRIC counterparts to witness accelerated growth in car sale,” Kandaswami added.

After registering 16 per cent CAGR in the decade, car sales in India have slowed down to a possible 3-4 per cent in 2011 on grounds of poor macroeconomic factors such as restrained growth of real disposable income, higher interest rates and fuel prices.