CAR SALES AT SIXYEAR HIGH
SUVs drive car sales to sixyear high in 201617; trend to continue: Analysts
Sales of passenger vehicles in India during the fiscal year ended March 31 crossed three million for the first time ever, growing at the fastest rate in six years, largely on the back of demand for sports utility vehicles (SUVs), according to data released by industry lobby group Society of Indian Automobile Manufacturers (Siam) on Tuesday.
The trend is likely to continue in 2017-18, analysts say.
Sales grew 9.24% to 3.04 million units during the year, the fastest growth rate seen since 2010-11, when they grew 28.2%.
Growth was driven by sales of utility vehicles, up 30% to 761,997 units, Siam data showed. Passenger car sales during the year grew at a modest 3.85% to 2.1 million units. India also registered its highest ever sales for twowheelers and exported the maximum number of passenger vehicles in 2016-17.
Siam issued a conservative forecast for the year ahead and said that it expects sales growth in the range of 7-9% as it sees cost of ownership increasing to 6% during the year on rising raw material and fuel costs. It also expects fewer SUVs to be launched during the year.
“Base for the year is going to be strong and, as you know, forecasts are anyway lucky or lousy. Therefore, we have to be moderate,” said Vishnu Mathur, director general, Siam.
Prices of some of the key comeasing modities used in automobiles, such as steel, aluminium, natural rubber and copper have risen sharply in the last six months. For instance, the price of copper has risen 26%. Average oil prices, another crucial factor for vehicle sales, remained at $44 in 2016. Siam expects the production cut announced by the Organisation of Petroleum Exporting Countries to cause prices to rise to $50-55 in 2017.
These factors will be offset by of finance costs, the economy’s recovery from the invalidation of high-value currency notes announced last year and improved consumer confidence. According to a Nielsen report, India’s consumer confidence rose to the highest level in 10 years during the quarter ended 31 December. The demonetization move crimped demand for vehicles but the situation has stabilised, Siam claimed, highlighting that sales across segments, except for three-wheelers, have grown in March.
India’s economy is set to grow at 7.4% in 2017-18 against 7.1% in the previous year on the back of pick-up in consumption demand and higher public investment, the Asian Development Bank said last week.
During the year, sales of twowheelers grew 6.89% to 17.58 million units. Total commercial vehicle sales grew 4.16% to 714,232 units but three-wheeler sales declined 4.93% to 511,658 units. Siam said two-wheeler sales will grow in the range of 9-11% and commercial vehicle sales in the range of 4-6%.
“We expect the Indian automotive market to witness growth in several pockets in FY18 as the various reforms and increased spending/investments kick in,” said Rakesh Batra, partner and India automotive leader, EY.
“Going forward, the roll-out of Goods and Services Tax (GST) and the subsequent industry transition to GST model is expected to impact the shortterm sales volume across segments,” he added.