The Indian automobile industry has been growing at 14% a year since the last five years. The industry has crossed an important milestone in 2005-06 by achieving a production of 10 million vehicles, including the tractors. The 2005-06 results were encouraging in all the segments with the industry recording 13% growth in sales volume over 2004-05. Passenger vehicle sales have posted 8% growth due to delayed purchases by consumers as a result of budget announcements. However, the exact trend is yet to be seen in subsequent quarters of FY2007.
Though, small and compact cars have been dominating the industry, MUVs and other higher-ended car segments are catching up very fast due to rising income levels of car owners who are migrating to high-end cars quite frequently. More importantly, shortening vehicle replacement age is another key demand driver. According to industry estimates, the replacement age for two-wheelers has shortened from five years to three years in 2003. In the case of cars, it has come down to five years from seven years. Maruti is maintaining its market leader position despite the entry of new models by other players. However, its nearest competitor Hyundai is leading the pack in car exports with 50% surge per year. The used car market is growing at a rapid pace and it has become lucrative opportunity for car majors such as Maruti where margins are better than new vehicle sales.
Similar to the industry trend, three-wheeler sales have grown by 17%. On the other hand, two-wheeler sales have grown by 14% with motorcycles contributing to 17% growth. Though Hero Honda has been steadily maintaining its market leader position in two-wheeler sales (2.8 million), its market share has dropped to 49% from 52% in 2004. Simultaneously, Bajaj Auto's market share with sales of 1.7 million has grown from 27% to 30%. With growing industrial and agricultural output in the country, the commercial vehicle segment recorded a growth rate of 10%. While the Medium and Heavy Commercial Vehicles (M&HCV) segment has grown by 4.5%, the Light Commercial Vehicles (LCVs) segment grew by more than 19% during 2005-06. Superior roads have lead to freight transport by road, and increased activity in the exploration, mining and construction has contributed to increase sales for CVs.
In addition to these factors, the Supreme Court ban on overloading of trucks and order to replace trucks over 15 years has created fresh demand for CVs. |
