Cars, two-wheelers help auto industry grow at 6.81%

Riding on high single digit growth in passenger vehicles and two-wheelers, the country's auto majors sold a record 21.86 million vehicles in the domestic market during FY17. This includes passenger vehicles (cars, utility vehicles and vans), two-wheelers (motorcycles, scooters and mopeds), commercial vehicles (light, medium and heavy) and three wheelers. The industry's growth (all segments combined) improved to 6.81 per cent, stronger than the 3.78 per cent reported in FY16.

The best growth was posted by passenger vehicles segment, which expanded by 9.23 per cent to sell a record three million vehicles helped by new launches and a strong demand for utility vehicles introduced by Maruti Suzuki (Brezza) and Hyundai (Creta). The March growth for the industry stood at 10 per cent when it sold 282,519 vehicles, data released by industry body Siam showed.

Siam Deputy Director Sugato Sen said the year witnessed the highest sales of passenger vehicles, utility vehicles, motorcycles and scooters. "In terms of passenger vehicles, we crossed the three million mark for the first time," Sen said.

Sales of two-wheelers, the biggest category by volume, also surged by 6.89 per cent in FY17, higher than the three per cent growth seen in FY16. Backed by a normal monsoon and increased wages of government employees, the industry was hoping to show a double-digit growth. Demonetisation, however, slowed down the demand November onwards. Volumes still hit a record 17.58 million units, helped by a double-digit growth in scooters.

Vishnu Mathur, Director General at Siam said the industry has been able to grow despite challenges of ban on big diesel SUVs and cars in the National Capital Region and demonetisation. "As for demonetisation, the impact was for only two months on the PV segment and recovery was quick, but it was prolonged in the two-wheeler segment," he said.

The commercial vehicle industry grew at just about four per cent, lower than the overall automobile growth of 6.81 per cent. Medium and heavy commercial vehicles saw a flat performance and volumes stood at 302,529 units compared to 302,397 units in FY16. Light commercial vehicles had a better year and managed to post a growth of 7.4 per cent.

The only segment that declined was three wheelers. Domestic volumes declined by almost five per cent to 511,658 units. Demand for three wheelers were badly impacted post demonetization. The segment had grown at almost 12 per cent during the April-October period of FY17 but started posting steep decline after demonetisation in November.

Siam expects FY18 passenger vehicle growth at high double digit. 

Domestic passenger vehicle sales are expected to grow by 7-9 per cent in 2017-18, with 7th Pay Commission payout and better Rabi output likely to support growth. However, increase in raw material costs and oil prices may negatively impact sales in FY18 when the number of new model launches will also remain low with cars likely to see more launches compared to utility vehicles, it added.

"We are seeing an improvement in the economic growth and also consumer sentiment. Factors like lower borrowing costs, pent-up demand after demonetisation and a mild budgetary support to incomes will drive consumption growth in 2017-18," Sen said.