Indian PV Outlook

Ammar Master, Senior Manager, Asia Pacific Vehicle Forecasts

19 December 2018

Indian Car sales

PV sales have crashed into a brick wall

In the past three months, Indian Passenger Vehicle (PV) sales have unexpectedly crashed into a brick wall of higher fuel prices, rising interest rates and inflation, higher insurance premiums, along with an erratic monsoon season.

Worse still is that the slowdown began during the festival season. This is typically a high sales period. Wholesales slumped 6% year-on-year (YoY) in September (albeit in part due to a high base in 2017), and were only slightly up (2% YoY) in October. PV volumes fell again in November by 4% YoY.

Retail sales have also been weaker due to low buyer sentiment. Data from the Federation of Automobile Dealers Association shows that registrations of PVs fell by 14% YoY during the 42-day festival period. The widening gap between wholesale and retail sales (registrations) means that inventory is building up and OEMs are likely to further reduce deliveries to dealers.

“Inventory is building up, and OEMs are likely to further reduce deliveries to dealers”

In addition to this, gains by the Indian National Congress (known as the Congress Party) in three key states during the recently concluded regional elections have created political uncertainty for the upcoming national elections in April-May 2019. The likelihood of a convincing win for Prime Minister Narendra Modi and his Hindu-nationalist Bharatiya Janata Party (BJP) is receding.

In light of all of these circumstances, we have downgraded India’s forecast and expect sales over the next year (especially from December 2018 to May 2019) to remain weak.

Indian car sales

Nevertheless, given the prevailing longer-term upward trend, the Indian Light Vehicle market is still on course to reach record sales of 3.99 mn units in 2018 and 4.12 mn units in 2019.

Sales should begin to recover in the second half of 2019, as political uncertainty clears after the elections. Pent-up demand – after weak sales in H1 2019 – should also drive volumes up. This would take place in advance of the implementation of BS VI emissions norms in April 2020.

In spite of our reduced projections, the long-term growth narrative for India remains intact.