Gasoline variant vehicles will dominate PV sales in the country

 

For the first time in a decade, the Indian passenger vehicle (PV) market witnessed a decline in production and sales due to weak macroeconomic growth, high inflation, rising fuel prices, and unfavorable government policies. Nevertheless, competitively-priced new cars in the mid-size and super compact segments will steer the market forward over the next few years.

New analysis from Frost & Sullivan, Market Forecast and Key Trends in the Passenger Vehicle Market in India, finds that PV sales stood at 2.4 million units in 2013 and estimates this to reach 3.6 million in 2019. By 2019, gasoline variant vehicles will dominate the market due to the narrowing price difference between gasoline and diesel as well as the introduction of new models in the utility vehicle and super compact segments.

“The low car per thousand ratio in India has encouraged global manufacturers to launch vehicles catering to the specific needs of the Indian market,” said Frost & Sullivan Automotive and Transportation Analyst. “Entry level sedans and SUVs from Honda, Ford and Renault offer buyers advanced vehicles at lower costs, thereby spurring demand and increasing business margins.”

Global original equipment manufacturers are also expanding their production capacity in India to make it an export hub, and PV production is expected to grow at a compound annual growth rate of 4.3 percent over the next five years. In 2015, however, this is likely to reduce to an extent primarily owing to massive duty hikes by the Sri Lankan government and Europe’s non-tariff barriers and preferential duty agreements with certain African and Latin American countries.

In the highly price-sensitive domestic market, escalating fuel prices impacts demand and hence pose a major threat to manufacturer profits. Further, people in metros and large cities prefer using public transport in order to avoid traffic and save time, thus affecting PV purchases.

“The next phase of market growth will depend on political stability and new reforms,” stressed the analyst. “Regulations that drive technology advancements and fuel efficiency improvements will play a crucial role in determining the road ahead for the Indian PV market.”

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