Car sales in India may be on a downslide at present but the total automobile market size will triple to 9.3 million units by 2020, according to global marketing information services company JD Power.
Driven by enhanced demand as the number of people with disposable income increases, the sector will grow at a compounded annual growth rate of 16 per cent during the period, the market research firm said.
"We may not see the spurt that we saw in China. India will have a consistent and gradual growth and our estimation is that by 2020 the automobile market in India will triple from the present size to about 9.3 million units," said Geoff Broderick, vice-president (Asia Pacific) and general manager of JD Power.
Explaining the factors that will drive the growth, he said, "As India's economy grows, the number of people with more disposable income is bound to increase. Moreover, there will be a sizeable amount of young population, who are going to be potential customers for cars."
Further, the infrastructure improvement in India will also play a role in the growth of the automobile market.
JD Power's forecast comes at a time when car sales growth rate in India plunged to a 12-year low in February, posting a 25.71 per cent decline to 1,58,513 units as high fuel prices, interest rates and low consumer sentiments took a toll.
"Yes there are short term challenges in India like the high interest rates, inflationary pressures but in the long term it has the advantages of having stable government and legal systems," Broderick said.
However, India would need to have consistent policies, especially when it comes to issues related to the sector such as fuel pricing, for the sector to fulfill its potential.
"The policies need to be consistent and there should not be any turbulence. For instance, due to ambiguity of diesel pricing many OEMs are unable to fix their plans. Some of them have even decided not to take a decision," said Mohit Arora, executive director (Asia Pacific) of JD Power.
When asked if India would move away from being a predominantly small car market, he said, "Not exactly. The Indian pyramid will not change and the small car will continue to dominate although the percentage can slightly decrease to about less than 70 per cent to 60 per cent from the current 70 per cent of the total car market."
Going forward, according to JD Power, automobile companies in India will adhere to the pursuit of profitable growth rather than chasing market share.
"Since the 2008-09 downturn, there has been a shift globally and also in India as they have learnt their lessons. Companies will no longer be going only after market share, the priority will be sustainable profitable growth," Mr Broderick said.
Disclaimer: Ventura Securities Ltd has taken due care and caution in compilation of data for its web blog. The information has been obtained from different sources which it considers reliable. However, Ventura Securities Ltd does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Ventura Securities Ltd especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its web blog. The information provided herein is just for the knowledge purpose and shouldn’t be construed as investment advice under any circumstances.