Apex industry body, Society of Indian Automobile Manufacturers (SIAM) has forecast a positive sales outlook for 2016-17.
08 Apr 2016 | 14407 Views | By Shobha Mathur
Apex industry body, Society of Indian Automobile Manufacturers (SIAM) has forecast a positive outlook for overall sales across vehicle categories for 2016-17.
According to SIAM, passenger vehicle sales are projected to grow between 6-8 percent, M&HCVs at 12-15 percent, Intermediate CVs at 7-9 percent and SCVs at 0 percent. ...
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Apex industry body, Society of Indian Automobile Manufacturers (SIAM) has forecast a positive outlook for overall sales across vehicle categories for 2016-17.
According to SIAM, passenger vehicle sales are projected to grow between 6-8 percent, M&HCVs at 12-15 percent, Intermediate CVs at 7-9 percent and SCVs at 0 percent. In the two-wheeler segment, motorcycle sales are forecast to grow between 0-3 percent and scooters between 17-19 percent.
Driving this growth will be the overall GDP of the country that is pitted to grow at a faster 7.9 percent during FY’17 while industry GDP would grow at 7.6 percent, a spin-off on account of the improvement in domestic demand, with support from public spending and the impact of policy reforms that would begin to show results.
Normal monsoons are expected during the year, as a result the agricultural GDP would experience a faster growth pace at 4 percent on a low base placing more disposable income in the hands of the rural populace and a consequent pick-up in sales of LCVs, three-wheelers and motorcycles dependent on the rural markets.
Commodity prices are also expected to stabilise with the recent 25 basis point repo rate cut by RBI putting the current rate at 6.50 percent. This is expected to soften rates during the fiscal.
As per a Nielsen report, the general sentiment is improving and India leads in the consumer confidence index with 131 points. An improvement in the investment climate with FDI inflows of $39.3 billion during January-December 2015, compared to $29 billion in January-December 2014 coupled with the impetus given to public transport and the hybrid and electric vehicle segments in the Delhi Budget are seen as an encouragement to the sector.
Passenger Vehicles sales to see an uptick
Against this improved background, passenger vehicle sales are pitted to get a leg-up in FY’17. The 7th Pay Commission announcement of wage hikes would provide a boost to consumer spending which in turn is expected to positively impact passenger vehicles sales. This is also expected to propel the replacement of cars bought five years ago.
“We expect the impact of the 7th pay commission to show its impact in the second half of FY17,” says Sugato Sen, deputy director general of SIAM. He admits that salary surveys have indicated a marginal improvement in the job market and salary growth in FY’17 that will propel higher disposable incomes in the hands of the people. Cost of ownership is also expected to rise by 1-2 percent while fuel prices will be marginally lower with crude costing $35-40 per barrel.
New model launches and competitive pricing in the crossover and compact UV segments would give a further fillip to utility vehicle sales.
Continued growth for M&HCVs, LCV sales to speed up
LCV demand is also expected to pick up due to improved consumption demand and ease of financing. This would be led by recovery in urban spending, lower commodity and oil prices, pay commission wage hikes, lower inflation and interest rates to stimulate demand, a normal monsoon that would drive strong agricultural freight demand during the Kharif harvest season.
Sales are also expected to be advanced in Q4 FY17 due to the pan-India BS-IV implementation from April 1, 2017.
As consumption expenditure picks up and availability of redistribution freight improves, non-performing assets are expected to decline easing the financing scenario by the first half of FY’17.
All this would enable M&HCV sales to notch double-digit growth. But tractor-trailer demand is expected to be flattish as end user segments like cars, cement and steel recover. Tipper trucks will get a boost with the focus on infrastructure growth and improved spend on National Highways, rise in iron ore and coal mining output as well as lifting of the sand mining ban in various regions.
Meanwhile, the bus segment is expected to grow on the back of demand for staff and school buses as also for buses for the tourism sector. STU sales are also expected to pick up further catering to delayed replacement of over-aged vehicles. JNNURM II orders for about 2,000-2,500 buses are expected to be completed during this fiscal.
Motorcycle sales, which faced a decline during FY’16, are envisioned to see mild recovery due to higher urban incomes as the domestic economy recovers. Further, the advent of a normal monsoon will give a fillip to commuter bike sales in rural India. This will considerably boost demand for mass market commuter bikes, sales of which have considerably reduced in the past 18 months.
The well-performing scooter sector will continue its accelerating sales act, riding on new model launches and aggressive manufacturing capacity expansion as well as dealership expansion in semi-urban and rural areas.
Three-wheeler sales are also estimated to recover with rising urbanisation and migration to cities boosting intra-city transportation. Three-wheeler manufacturers are pushing further into rural areas as small CVs try to encroach on traditional three- heeler markets.
However, despite these hunky-dory projections, key concerns relate to the increase in vehicle cost due to the new infrastructure cess announced in the Annual Budget FY’17. Steel, which is used in large quantities in vehicle manufacture, has seen a rise in prices over the last three months. Industrial production has been dwindling (IIP shrunk by 1.5 percent in January 2016), vehicle finance rates still remain very high and uncertainty persists due to various ad hoc government policies that will dent capital expenditures of vehicle manufacturers.
But overall, the dark clouds hovering over the Indian auto industry are set to be dispelled further.
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