Ind-Ra: Automobile Export Momentum to Continue in FY19

India Ratings and Research (Ind-Ra) expects the automobile export volume growth momentum to continue in FY19, although at a slower pace than in FY18. Automobile exports from India revived in FY18, after showing subdued growth for two years due to weak economies and currencies in African and Latin America (LATAM) countries. With the stabilisation of commodity prices and exchange rates, these regions have witnessed economic stability, inducing demand for two wheelers (2W) in particular. Ind-Ra expects high single-digit growth in overall exports volume in FY19.

The agency expects 2W exports to continue to grow in FY19 as 2W manufacturers namely, Bajaj Auto Ltd and TVS Motor Company Ltd, have export-focused strategies and sufficient capacities in place. Africa and LATAM are likely to be the key growth drivers.

Further, FY19 could see a recovery in passenger vehicle (PV) exports, which declined in FY18 after growing consistently since FY12, driven by utility vehicles. Original equipment manufacturers (OEMs) were focused towards meeting increasing domestic demand for utility vehicles in FY18, and faced delays in GST refunds, which however has streamlined now. PV exports from India would be aided by the export focus of certain multinational OEMs such as Nissan-Ranault alliance, Ford India Private Ltd ('IND AAA'/Stable), FCA India Automobiles Pvt. Ltd and General Motors India Pvt Ltd. However, high capacity utilisation at Maruti Suzuki India Ltd (Maruti) and Hyundai Motor India Ltd (Hyundai) are likely to constrain the capacities available for PV exports with these manufacturers. The Indian utility vehicle OEMs are likely to focus their energies this year on new model launches given the intense competition for gaining market share in this segment.

Over 2020-2021, the upcoming facilities of new entrants, such as Kia Motors Corporation, Korea and SAIC Motor Corporation Limited, China, would add to exports from India. Additionally, the demand for Indian-made vehicles could be fuelled globally with Bharat Stage VI compliant vehicles being made mandatory from April 2020.

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