Indian automotive market to overtake Germany, Brazil, Japan by 2016

Nabeel Khan Published: July 27, 2013, 02:35 PM IST

The Indian automobile market will surpass Germany, Brazil and Japan by 2016 to claim the third spot globally in terms of volume, a global research and market information firm IHS Automotive said recently. Last year, China, the US and Japan were the top three global automotive markets and India was ranked sixth after Brazil and Germany in the fourth and fifth positions respectively.

Indian automotive market to overtake Germany, Brazil, Japan by 2016IHS Automotive also says that sales growth will come from luxury as well as mass-market vehicles

Commenting on this, Charles Chesbrough, Senior Principal Economist, IHS said, "With demand for vehicles declining in most mature markets in the face of the global recession, high fuel costs and urban driving restrictions, the industry is turning its attention more strongly towards the expanding middle classes in the new powerhouse of China, India, Brazil, Russia and other growing nations. We expect that by 2016, vehicle sales in India would surpass Brazil, Germany and Japan making India the third largest market".

Remaining bullish on the Indian market in the mid to long term, IHS said: "Investment reform policy will induce better environment for domestic and foreign enterprises. India light vehicle production is expected to reach 7 million by 2020." It defined light vehicles as all the LCVs, MPVs, Cars and CV below 6 tones.

The Colorado-headquartered firm also insisted that the growth in sales will not come only from the mass segment but also from the luxury segment vehicles. "The transforming Indian market conditions are acting as a catalyst for luxury and premium carmakers, which are receiving impetus from new launches. The top-end carmakers have posted double-digit growth for the quarter ended June 30, 2013," said James Chao, Director, IHS Automotive Consulting, APAC.

The research firm anticipates that the purchasing power of the Indian citizen will increase in the coming year while the markets will start reviving from the next quarter. The other benefit that India offers is a lower market penetration. However, the firm highlighted poor infrastructure as a deterrent for speedy growth. "It is going to take a little longer in India because of the lack of infrastructure support but going by the history of other developing market we know the personal behaviour as people gain wealth, they want freedom, ability to go where they want to go and when they want to go," Chesbrough said. In June, car sales in India declined 9 percent for the eighth month in a row to 139,632 units, and overall auto sales declined by 5.1 percent to 1.41 million units. In 2013, India will have 3.19 light vehicles sold, IHS said.

In line with Auto Monitor's projection in the past, IHS Automotive affirmed that as the market grows by 2020, the leaders such as Maruti Suzuki, Hyundai and Tata Motors will lose its market share to give way to new players. Though Maruti Suzuki will continue to hold the biggest market share, it will trim down to 26 percent from the current 30 percent in the light vehicle segment. Similarly, Tata Motors, which currently have a market share of 19 percent, will slip to 13 percent by 2020. Homegrown Utility Vehicle manufacturer Mahindra will lose market share from 14 percent to 11 percent. According to IHS Automotive, the currently marginal players such as VW, Ford, Honda, Renault, and Nissan will increase their market share in the coming years.

The other interesting factor reflected in the research conducted by IHS Automotive was that while the increasing number of vehicles on the roads will lead to more congestion and accidents, the demand for safety features, infotainment, and comfort will rise as people will tend to spend more time in their cars.

Nabeel A Khan originally reported this for Auto Monitor

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