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Car sales in India are expected to bounce back with a bang by the second half of 2012 if macro-economic pressures ease, said Deloitte.
While pent-up demand from this year and beginning of the next will be one reason for the sales increase, upward income migration of households, increasing urbanisation and a lower interest rate scenario are expected to be the other key factors.
The Deloitte report ‘Driving through BRIC markets – Lessons for Indian car manufacturers’, analyses the impact of macro-economic conditions in similar growth markets and addresses concerns on sustainability of sales growth in India.
“If inflation comes down by the second-half, car sales will have a strong upsurge. In India and China, the urban market still has headroom to grow, which will stay for some time,” Mr Kumar Kandaswami, Senior Director at Deloitte Touche Tohmatsu India, told Business Line .
He added, “A stated fuel policy, especially clarity on diesel, is important to sustain growth. Better urban infrastructure is needed to reduce fuel wastage as well.”
Car sales in the country are estimated to post just a 3 per cent rise in 2011, largely as spending dipped on a small 2.4 per cent growth in personal disposable income. In the year, interest rates, fuel and food prices, all went up.
Other BRIC markets did not fare very well either - sales in China rose only 4 per cent as the Government tried to curb car purchases, while high interest rates led to a 5 per cent growth in Brazil. Russia saw a 28 per cent increase on continued loan subsidy scheme and other incentives, but the share of imports and foreign carmakers radically fell.
“These are the next growth markets, so for India we have to see what we can learn for our own mid and long-term growth. In per capita disposable income India has the lowest growth,” said Mr Kandaswami.
One of the main drivers is that household incomes are rising fast – from the $3,000-5,000 group, many are moving to $5,000 and above (CAGR of 35%). “This will lead to sustained demand, though for a decade or so, small cars will be most important,” he said.
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