'Exports to drive India's LV output' - Gaurav Vangaal, S&P Mobility

As the automotive industry continues to navigate global disruptions, economic headwinds, and technological advancements, the Indian light vehicle market continues to stand out with its resilience and potential. With a projected growth rate of 3.4% year-on-year in 2024, India is poised to play a significant role in shaping the future of the global automotive landscape.

In an interview with Ketan Thakkar, Gaurav Vangaal, associate director for production forecasting at S&P Global Automotive, shared his insights on India’s light vehicle market and the role of exports from India over the next decade. Edited Excerpts:

How do you see the growth of the Indian light vehicle market in 2024, and how does it compare with the global markets? 

The market will reach 5.62 million units in CY 2024, compared to 5.4 million in CY 2023. While the US, Japan, Germany, and South Korea are expected to experience negative growth rates, India and China continue to show growth.

Source: S&P Global Mobility Light Vehicle Production Forecast(0-6 ton)

Does India retain its tag of the fastest-growing market in the top 10 markets worldwide despite the recent moderation in growth rates? 

For CY 2024, it appears that India will maintain its status; however, in 2023, it lost to other countries among the major production bases (top 6). Notably, pre-COVID, China reached its peak production in 2017 with 27.7 million units, surpassing that peak in 2023 with 28.7 million units. Similarly, India's LVP peaked in 2018 at 4.7 million units and exceeded that peak in 2022 with 5.1 million units. The remaining countries have yet to reach their pre-COVID production levels.

How has India fared in light vehicle and passenger vehicle production versus its nearest rival Japan? Has the country extended its lead over Japan, and how do you see the gap evolving in the short to mid-term? 

Regarding light vehicle production, India is still trailing behind Japan, and we anticipate that it will only be able to surpass Japan by 2030-2031. Japan exports approximately 49% of its total Light Vehicle production, while India exports only around 16%. This highlights the differing production bases: India relies heavily on its domestic market, whereas Japan has a balanced dependence on export and domestic markets for the future. For instance, in 2023, Japan exported over 1.5 million units to the USA, while India exported zero vehicles. To close this gap, India must begin exporting to mature markets in significant volumes, or its domestic market must grow much faster.

How do you see the compounded annual growth rate of Indian light vehicles in the coming decade? Do you expect it to gain momentum and grow faster than the last decade? 

Over the past decade (2013-2023), India's light vehicle market has outperformed those of major global economies, achieving a CAGR of 4.1%, compared to Mainland China's 3.2%. Looking ahead to the next decade, India is projected to achieve a CAGR of 4.3% (2023-2033), while Mainland China is expected to see a CAGR of only 1.6%.  

Exports have been an important pillar for numerous global automakers to stay viable in the Indian market; how do you see India's role changing with the emergence of electric vehicles?

Exports have always been vital for India to achieve economies of scale and establish competitive cost structures in a challenging market like India. The success of companies like Hyundai and Kia showcases the benefits of this strategy. For the latest technologies to become affordable, it is essential to reach the right scale. In the electric vehicle sector, India has a significant role to play. Nearly every carmaker is exploring an export volume strategy for India, but only a few have managed to adapt and move to production lines.

With the support of the Production-Linked Incentive (PLI) scheme, we anticipate that carmakers will begin exporting to mature markets like Europe and Japan in the next financial year, enhancing India's automotive capabilities. Therefore, in the coming years, we can expect to see new destinations added to Indian exports, increased volumes and business growth. However, ongoing disruptions in each country, caused by regulations, sustainability targets, and a resurgence of protectionism, could significantly affect export strategies.