Mumbai/New Delhi – Growth in Indian’s passenger vehicle market could outpace all previous records in 2021, forecast analysts, citing a very low base after two years of double-digit decline and sustained pent-up demand.
A laggard among the top 10 global passenger vehicle markets in 2020 after one of the most stringent and prolonged lockdowns in the world to contain Covid-19, India is expected to be among the fastest-growing this year, probably only next to the US.
New product launches, quick economic recovery and the upside of Covid-19 vaccines will drive buyers back to showrooms, creating a sustained demand for personal mobility, according to forecasters.
Analysts at IHS Markit, JATO Dynamics, Credit Suisse and Nomura are predicting growth to be 23% to 32% in the calendar year 2021. The fastest recorded growth so far is 30%, in 2010.
Ravi Bhatia, president of JATO Dynamics India, predicts the market to grow between 28% and 31%.
“The optimistic scenario would be an achievement of 2018 volumes at 3.2 million,” said Bhatia.
He expects light commercial vehicle sales too to record 40% growth in 2021. The volume had fallen to 0.5 million in 2020 from 0.7 million the year before.
One of the key demand drivers will be new launches. Vehicle makers are expected to launch 56 products in 2021, topping last year’s 54 launches.
The Indian market is now expected to outperform global PV growth by a significant 15-20 percentage points.Experts
The year 2021 will witness the entry of Groupe PSA, new products from the Volkswagen Group and over a dozen “high-decibel new launches” of SUVs from the top five to seven carmakers, “further spoiling prospective buyers with more choice and added value”, said Gaurav Vangaal, associate director at global forecasting firm IHS Markit.
Maruti Suzuki will be introducing two new entry cars – the all new Celerio and the Alto 800 — and Hyundai is set to launch a new premium SUV to take on the MG Hector and Mahindra XUV 500. Mahindra & Mahindra, on its part, will be coming out with the all-new XUV 500 and Scorpio. Tata Motors is set to add an SUV at both the entry level and the top end to sustain the 2020 momentum, while Renault will challenge the maker of the Nexon with its own version of an entry SUV.
The Indian passenger vehicle volume dropped 18% in 2020 and was undergoing one of the longest protracted slowdowns in three decades, before the lockdown-related disruption further compressed the volume.
According to experts, the Indian market is now expected to outperform global PV growth by a significant 15-20 percentage points.
Automakers also expect the industry to post strong sales in 2021.
“While uncertainties persist if in case there is a second wave of coronavirus outbreak, and as relate to recovery in certain sectors like travel and hospitality, the momentum in the market is healthy,” said Tarun Garg, director of sales, marketing and service at Hyundai Motor India. Rajeev Chaba, president at MG Motor India, said, “given the low base, the industry should grow by at least 18-20%”. The company is targeting 80% sales growth and volume of 50,000 units in 2021.
The Asian market is likely to be the biggest contributor to incremental global PV volume growth in 2021. And Indian passenger volume growth is likely to be one of the best in the major global car market in 2021, barring Indonesia, which is not part of the top 10 global markets.
In a report on the global auto demand for 2021, brokerage firm Credit Suisse estimated India’s PV market to grow 31% in 2021 and 8% in 2022.
The brokerage house believes the postponement of replacement demand for PVs in FY20 and FY21 had been sizeable, and that it could come back as the economy starts recovering.
Japanese brokerage Nomura predicts the Indian PV market to grow 25.9% in FY22 and 12.5% the following fiscal year.
“An economic recovery, improved job market conditions, and strong rural demand should sustain healthy momentum for new vehicle sales over the medium term, partly offset by waning demand for personal over public transport, as people learn to live with the virus,” Nomura said in its annual auto outlook report. However, a serious second wave of infections could delay the recovery, it said.
An introduction of scrappage policy and improvement in credit may provide additional acceleration to the growth rate, said Bhatia of Jato.