Passenger car sales seen at 3.5m by 2015

Annual passenger car sales in India could hit the 3.5-million-mark by 2015 from one million cars sold in 2003, according to consulting firm Booz Allen Hamilton.

The projection is based on a 'positive case' scenario where the growth rate in passenger car sales has been assumed at 40 per cent above the country's GDP growth rate.

The study also provided two alternate scenarios which result in lower numbers than the first one: a 'base case' of 20 per cent growth above the GDP growth rate and a 'passive case' where growth in sales is equal to the GDP growth.

The average of the three scenarios projects annual passenger car sales to grow to a little over three million cars per annum. A similar average in 2010 would result in an annual sales of 2.1 million.

The report assumes that the economy keeps growing at 5-7 per cent per annum and the structural and banking reforms keep pace. The passenger cars per 1000 population is also expected to be 15 in 2008 and 8.5 in 2005 by Booz Allen Hamilton.

Foreign direct investment are also set to touch $13 billion in 2008 and $8.6 billion in 2005, the report says. The report argues that the boost in passenger car sales will be due to the rise in personal incomes and the increased competition in the market place which will drive down automobile prices.

The report also says that the growth in passenger car sales might not exactly be a bubble waiting to burst.

The reports cites the case of Brazil where the growth and investments were far ahead of what it is projected for India. The progress in Indian automotive sector has been far more deliberate, thereby lowering the risk of a potential bubble.

In the 1995-2000 time frame, the total FDI this sector attracted in Brazil was $11.9 billion, while in wider period, between 1993-2000, India managed to attract only $1.5 billion. Thus the annual average was $2 billion for Brazil and $0.2 billion for India.

Further, all of Brazil fresh investments came as greenfield projects while 82 per cent of investments in India, during this period were in the joint venture mode.

The growing consumer base makes the Indian market akin more to the Chinese than the Brazilian market, the report says.

Motown boom

• Passenger cars per 1,000 population is expected to rise to 8.5 in 2005 and 15 in 2008
• The progress in the automotive sector has been far more deliberate, thereby lowering the risk of a potential bubble, the Booz Allen Hamilton report observed
• The report assumes that the economy keeps growing at 5-7 per cent per annum and structural and banking reforms keep pace
• The boost in passenger car sales will be due to the rise in personal incomes and the increased competition in the market place which will drive down automobile prices