FY17 passenger vehicle sales growth to be 6-8%
Siam revises projections due to infrastructure cess, concerns around diesel cars
 "FY17 passenger vehicle sales growth to be 6-8%")
Sales of passenger vehicles — cars, vans and utility vehicles — grew at 7.2 per cent in FY16 to 2.78 million units, highest in five years. The current year’s growth, however, could be limited to some companies. Consequently, many could struggle to increase operating capacity.
Sugato Sen, deputy director general of the Society of Indian Automobile Manufacturers (Siam) said a model developed by consultants had projected 11 per cent growth in November last year. However, this number has been revised to six to eight per cent now after consultation with stakeholders, including manufacturers, consultants and financial institutions.
The revision is in response to the actions against diesel vehicles and imposition of new infra cess of up to 2.5 per cent in the Budget.
Top companies like Maruti and Hyundai, which together command a 64 per cent market share, are eyeing a double digit growth this year too.
“The automobile industry is still in a slow recovery phase. Profitability for most companies is in the negative. Many international companies are losing confidence in the Indian market. Court interventions are complicating matters. Cars are highest tax item among manufactured products. There has been no initiative from the government to support the industry,” Sen said.
“Some of the challenges such as uncertainty relating to diesel vehicles in NCR, infrastructure cess and distress in rural economy has impacted the growth and will continue to impact in future till the diesel vehicle uncertainty is resolved,” said Abdul Majeed, partner at PricewaterhouseCoopers.
Commercial vehicle sales grew at 11.51% in FY16, led by the 30% growth in the medium and heavy commercial vehicles while the light commercial vehicles. Siam estimates the medium and heavy commercial vehicle industry to grow at 12-15% in the current year. "A 30% year after year growth cannot be anticipated in this segment," Sen said.
Two wheeler sales grew by 3% last year, helped by a near 12% growth in scooters. Scooter sales touched a peak at about 5 million units last year. Scooters formed about 30% of two wheeler market last year against 28% in FY15.
Motorcycle sales declined marginally (by 0.24%) to 10.7 million units last year. Siam anticipates motorcycle sales to remain flat or grow up to 3% in the ongoing year. Scooter sales are projected to grow by 17-19% in FY17, the industry body said.
"The Indian automotive market witnessed a fragmented and slow recovery during FY16. The market was largely driven by new model launches, lower fuel prices and declining interest rates. However, the rural demand was sluggish on account of adverse economic conditions.
The vehicle segments that drove overall market growth included passenger cars, medium and heavy commercial vehicles and scooters while light commercial vehicles and motorcycles pulled down the growth," said Rakesh Batra, partner and national leader (automotive sector) at Ernst & Young.
Sen said the parent companies of international automobile manufacturers operating in India are concerned about the policy environment in India as many recent decisions have not been conducive.