India: car sales growth slows to 1-3% in FY2012

Suzuki, Honda, Renault-Nissan, Hyundai and Ford boost capacity of diesel engines

2012/11/22

Summary

Vehicle production, domestic sales and exports for India

Market share of passenger vehicles in India

 In FY2011 (from April 2011 to March 2012), India produced 4.04 million vehicles and sold 3.43 million units, which is ranked 6th in the world. However, the growth rate of new vehicle sales slowed down from 28.3% in FY2010, to 7.6% in FY2011, and further to 6.2% in the first half of FY2012. According to the estimate (announced in October 2012) by the Society of Indian Automobile Manufacturers (SIAM), passenger car sales (excluding SUVs and vans) will increase only by 1-3% in FY2012. SIAM says that this is caused by the slowdown of India's economic growth as well as higher gasoline prices due to the lifting of price controls and the persistently high auto loan rate.

 In India, compact cars that are 4 meters or shorter in overall length, which bear a low excise tax accounted for 60% of the market, but the rate declined to nearly 50% in the first half of 2012, while sales of midsize or larger passenger cars and Utility Vehicles including SUVs increased. Various OEMs are introducing a wide variety of new models including compact cars, which are the core models in India, and midsize cars and SUVs.

 The market expansion has been slowing down, but the increase in demand in India is still expected to be large in the future and many OEMs are currently enhancing production of vehicles. Maruti Suzuki, the largest OEM that holds a 38% share of the passenger vehicle market, will build a new plant in Gujarat that is capable of producing 250K vehicles/year in order to prepare the production capacity of 2 million units in 2015-2016. Toyota will boost production capacity of its two existing plants from 210K to 310K units/year while Nissan will increase production capacity of its joint venture plant with Renault to 400K units/year. Isuzu plans to construct a plant that is capable of producing 100K units/year by 2016. Among US OEMs, Ford is currently building a new plant that has a production capacity of 240K units/year in Gujarat.

 As India maintains price controls on diesel fuel, the demand for diesel vehicles that have low fuel cost has been increasing; more OEMs are introducing diesel models in the market and boosting production capacity of diesel engines.