Stable outlook for Indian automobile sector: Fitch Ratings

Global credit rating agency Fitch Ratings on Thursday said its outlook on Indian automobile industry is stable for this fiscal on the back of falling vehicle ownership costs owing to lower fuel prices, new product launches and the expected 7.5 per cent economic growth rate.

"With consensus expectations of better monsoon rains in FY17 (2016-17) and new model launches intensifying competition in the passenger and two-wheeler segments, Fitch believes replacement demand will increase, supporting commercial vehicle demand. In addition, a 23.5 percent salary hike for government employees, effective in 2016, will provide a one-time demand boost to all automobile segments," the rating agency said in a statement here.

Robust macroeconomic expansion in FY16 supported the 7.2 per cent growth in Indian domestic passenger vehicle sales (FY15: 3.9 per cent) to 2.8 million units.

Commercial vehicle sales, which were also boosted by a revival in the mining sector, increased 11.5 per cent (FY15: minus 2.8 per cent). Fitch expects the strong growth to be sustained into the following financial year, the statement said.

Sale volumes in the three-wheeler segment grew by a modest one per cent (FY15: 10.9 per cent) and in the two-wheeler segment by three per cent (FY15: 7.9 per cent), as rural demand was adversely affected by a poor monsoon in FY16.

The Indian automobile industry, whose total FY16 sales grew 35 per cent to 24.1 million units since FY11, primarily caters to the domestic market. Domestic sales accounted for 85 per cent of total vehicle sales in FY16, while exports accounted for the balance.

India's sizable rural- and middle-income population drives demand for two-wheelers, which accounted for 80 per cent of FY16 domestic vehicle sales. Passenger vehicles constituted 13 per cent of sales, while commercial and three-wheeler sales were three per cent each of total vehicle sales.

--IANS

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