Passenger vehicle mkt to touch 4.86 mn units by FY16

Rating agency ICRA today said the Indian passenger vehicle industry will touch 4.86 million units by 2015-16 due to factors like robust economic growth, rising disposable income and easy availability of finances.

"We estimate the Indian passenger vehicle (PV) industry will reach 4.86 million in annual sales by FY16, representing a growth of 10.8% CAGR (compound annual growth rate) over the next five years," ICRA said.

The Indian PV segment grew by 26% to 1.95 million units in 2009-10 and is estimated to increase by 21-23% to 24 lakh units in this fiscal.

"A buoyant economic growth, growing middle class population, rising disposable income levels, relatively low penetration of cars and adequate availability of financing are likely to provide an ideal backdrop for a sustained long-term demand growth for the sector," ICRA Senior Vice President and Head (Corporate Ratings) Subrata Ray said.

The domestic passenger vehicles industry witnessed a relatively steady growth over most of the last decade and has registered a 10 years CAGR of 10.3% during the period, ICRA said.

The report said the Indian PV segment is ranked the seventh-largest in the world and the present size of the market makes it comparable with some economies.

"The presence of global players, introduction of global platforms/technologies and stricter emission norms indicate that the market is gradually attaining maturity," ICRA said.

With global demand shifting to smaller cars, global players are likely to focus on strategies to produce cars of the same platforms in low-cost countries like India, Thailand and Mexico, it added.

"In terms of cost competitiveness, India has built up the scale and significant competencies and cost advantages in the production of small cars. It benefits from lower development and labour costs, and improving auto component manufacturing base," the study said.

ICRA, however, said the segment is facing challenges such as rising commodity prices, increased interest rates, tightening of liquidity scenario and rising competitive intensity.