New Delhi: Passenger vehicle sales are expected to nearly double by 2014 from the current 18.9 lakh units, mainly driven by anticipated economic growth fuelling the aspirational lifestyles of consumers.
According to global consultant Ernst & Young (E&Y), the total sales of passenger vehicles are expected to touch 37.5 lakh units within next five years witnessing an annual growth of 12%.
While domestic market is expected to contribute 27.5 lakh units to the total tally, the remaining would come from exports, an E&Y report said.
“Economic growth with changing demographics and aspirational lifestyles are the main drivers for the growth in domestic market, supported by government support in the form of reduced excise duties, concessions on cleaner fuels and the ongoing improvement in highways,” it added.
The study further said stimulus packages would prevent the market from a free fall and the benefits are expected to continue till assurance of sustenance of manufacturers is established.
Taking note of the changing scenario of the Indian auto industry, the consultant said the entry of ultra low-cost cars, like Nano, would increase the penetration level from the existing nine cars per 1,000 persons.
”The manufacturers’ brand equity is also expected to playa significant role in the purchasing decision by consumers.
“Indian industry is generally drifting towards monopolistic scenario wherein there will be large number of players selling similar products as against current oligopoly where we have fewer big players,” E&Y Partner and National industry leader (automotive practice) Rakesh Batra said.
Although exports are poised to grow significantly due to India’s fuel-efficient low-cost product range, Batra said, there is an upside risk on exports as it is dependent on the recovery of the global markets.
On capacity utilisation by the industry, the report said it stood at an average of 65% in FY09, almost same to the global average at 64%.
Even though there was an excess capacity in 2008 due to slowdown, both national and global players are expected to add to the capacities to take it to 54.2 lakh units by 2014 from 28.9 lakh units at present.
“The long term growth drivers are in place, which is leading both international as well as domestic players to add to their capacities significantly,” Batra said.
Further, although some manufacturers have postponed their investment plans, looking at the long-term potential they are expected to resume these projects in the near future.
Besides, E&Y said Indian makers with unutilised capacities stand to benefit in future as global auto players are expected to consolidate their operations by reducing number of sites amidst shrinking demand.