3 min read.Updated: 26 Jul 2016, 05:05 AM ISTAmrit Raj
The forecast, in line with the government's Auto Mission Plan II, comes at a time when passenger vehicle sales are on a rebound
New Delhi: Maruti Suzuki India Ltd, India’s largest car maker, said that the local car market will reach 5 million units in annual sales by 2020, making the country the fourth-largest market in the world.
The estimates were given by Maruti Suzuki chairman R.C. Bhargava at an auto parts conference on Monday.
“At five million cars by 2020, we will be just about number four (in the global pecking order)," Bhargava said in his address on Changing Trends in Automotive Supply Chain, organized by the Auto Components Manufacturers of India.
Maruti’s forecast is in line with the central government’s Auto Mission Plan II that forecasts the passenger vehicle (PV) market to more than triple to 9.4 million units by 2026 from 2.8 million now if the economy grows at an average rate of 5.8% a year. If the economy grows at an average yearly pace of 7.5%, the size of the passenger vehicle market is forecast to rise to 13.4 million units, making it the world’s second largest after China. Mint reported this first on 2 September 2015
Bhargava added the Indian automotive sector is poised for solid growth and “demand for cars will grow faster than in the last two years" when a market slowdown impacted sales.
“Despite what NGT (National Green Tribunal) or others are trying to do, we’ll achieve higher growth than last year," Bhargava said, referring to a recent order by the NGT that seeks to scrap diesel vehicles older than 10 years on Delhi roads.
To be sure, the NGT order is also likely to propel growth in vehicle sales as it will create a replacement demand in the market. As of 2014, Delhi had 8.9 million registered passenger vehicles. Of these, there are around 220,000 diesel passenger vehicles and 170,000 commercial vehicles that are more than 10 years old, according to industry estimates.
The process of de-registration of diesel vehicles in the National Capital Region will start with the scrapping of 15-year-old diesel vehicles.
Bhargava’s projections come at a time when the passenger vehicle sales are on a rebound in the country after the segment declined once and grew in lower single digits thrice in the last four years.
Sales have picked up largely because of a moderation in interest rates and lower fuel prices. Between July 2015 and June, car loan rates have come down by 65 basis points for public sector banks and 25 basis points for private banks.
One basis point is one-hundredth of a percentage point.
Hopes of faster growth have been fanned by predictions of better-than-average monsoon rainfall. The India Meteorological Department (IMD) and private forecaster Skymet Weather Services Pvt. Ltd have predicted above-normal rain in the June-September south-west monsoon, after two consecutive years of drought. A pick-up in sales in rural areas however may take longer because of the extent of distress among farmers.
Latest data from IMD shows that the rainfall deficit in the entire country is now nil and that 75% of the country has received normal-to-excess rainfall so far this season.
Implementation of the recommendations of the seventh pay commission will also lead to a slight spike in demand.
Maruti Suzuki’s vehicle sales grew 11.5% to 1.3 million in 2015 -16, outpacing the Indian passenger vehicle industry’s aggregate 7.24% growth during the year. Including exports, Maruti sold a total of 1.42 million units.
For 2016-17, the car maker has forecast that sales will grow at lower double digits. Maruti’s car sales, including exports, grew just 2.1% to 348,443 units in the first three months of this fiscal because of a disruption in production.
Maruti will look to sell more than 1.5 million units in the current year. With new production capacity being added through its manufacturing agreement with its parent Suzuki Motor Corp. in Gujarat, the car maker will be able to sell 1.75 million units in 2017-18, said another top Maruti executive.
“By 2020, Maruti should be doing 2 million units every year," said Deepak Sethi, executive director (supply chain) at Maruti Suzuki.
On Monday, shares of Maruti rose 3.11% to ₹ 4,550.60 on BSE while Sensex advanced 1.05% to 28,095.34 points.
The company will announce its financial results for the quarter ended 30 June on Tuesday.
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