Despite decline, long-term growth of automotive sector is intact

June 17, 2013 11:45 am

“The government should support the automotive industry with specific measures that can lead to job creation and boost national economic output.”
– Shripad Ranade, Senior Principal – Auto & Engineering, Tata Strategic Management Group
Automotive sales have declined in FY13. However, the long-term growth of the sector is intact due to generally inadequate urban transport facilities in India. A closer look at segment-wise sales points to different underlying factors for each segment. Shripad Ranade shares how to support and revive the automotive industry.
The two wheeler segment has grown marginally by 2.5 per cent in FY13. A major driver of sales in this segment is rural India. Stagnation in disposable income in rural areas, partly due to fluctuating monsoons, has led to reduction in demand of two wheelers.
Declined automotive sectorThe passenger car segment is declined by 3 per cent in FY13. High inflation and less than commensurate rise in incomes have given rise to a negative outlook among potential buyers. These coupled with increasing fuel price and interest rates have led to postponement of the car purchase decision. The exception to this trend is utility vehicles (UVs). The UV segment has grown by 30 per cent in FY13. Introduction of world-class models improved fuel efficiency, and affordable pricing have successfully captured customers’ imagination.
Demand of light commercial vehicles (LCVs) has improved in FY13. LCV’s ability to provide businesses with cheaper and more fuel-efficient option (vs larger trucks) for last mile delivery has led to spur in its demand.

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