Passenger vehicle sales set to post near double-digit growth in FY16

Apart from spate of new launches, low fuel prices, fall in interest rates have contributed to the demand

Sales of passenger vehicles (cars, sports utility vehicles and vans) look set to post its best annual growth of high single digit (in FY16) in the past five years. In FY15, sales grew 3.9 per cent. Companies have reported domestic sales growth of 8.51 per cent in the April-October period of the current financial year. Diwali driven demand is expected to contribute further to the growth trend in passenger vehicles.

Apart from a series of new launches, factors such as low fuel prices and decline in interest rates have contributed to the demand. Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers, said the passenger vehicle sales are expected to grow eight-10 per cent in the current year. The growth might not be broad-based as companies like General Motors, Mahindra, Nissan, etc., have shown sales decline in the current year. The growth is being led by Maruti, Hyundai and Honda, among others.

“There are many favourable indicators to propel growth in the automotive sector such as low interest rates, pent up demand across segments, low fuel prices, etc. The remaining part of festival season will bring cheers to the automakers,” said Abdul Majeed, partner at PricewaterhouseCoopers.

The passenger vehicle segment saw sales a growth of 21.46 per cent in October, helped by festive demand (Dussehra). But the sales growth in October was not limited to passenger vehicles alone. Sales of two-wheelers grew 13 per cent. Within the two-wheeler segment, motorcycles, under pressure for many months on rural demand weakness, posted a growth of 5.66 per cent, after a decline of 12 months. Scooters continue to enjoy the growth ride, posting near 37 per cent jump. Scooters, which have grown at a high double digit rate for many months, now form 30 per cent of the two-wheeler industry against 27 per cent a year-ago.

The medium and heavy commercial vehicle segment grew 24 per cent to 22,181 units in October. The light commercial vehicle (LCV) segment saw its first growth in over a year, posting growth of 6.83 per cent in the month. “The LCV replacement demand seems to have kicked in. However, real growth will start once we touch the previous peak sales of 5,766 units in March 2012,” said Mathur.