India Ratings estimates slow growth in domestic auto market for 2013

Friday 11 January 2013, 12:43 PM by

India Ratings and Research, one of the country's most respected agencies providing studies on market trends, has projected a stable growth in the domestic automotive sector for calendar year 2013. The ratings firm has underlined factors, such as structural shortcomings and excess capacity for the estimated muted growth in the Indian automotive sector.

India Ratings expects a subdued growth in the passenger and commercial vehicle segments of the domestic auto market. Expressing his mind regarding the growth expectations, Deep N. Mukherjee, Director Corporate of India Ratings quoted, “Our outlook for the auto sector is stable. The growth will continue to be there but it will be muted as compared to previous years.” Mukherjee pointed out some basic structural shortcomings in the domestic passenger vehicle industry and added, “There are also some early signs of building of some over capacity in passenger's vehicle segment as well.”

The growth in sales of domestic passenger vehicle segment is projected around 8 to 9 per cent. According to India Ratings, the growth will be fuelled largely by the sales of utility vehicles in the country, which are anticipated to surge ahead by 30 to 35 per cent in 2013. Furthers, in 2013, cars and vans could witness a stunted growth of 2 to 3 per cent and 0.5 to 1.5 per cent, respectively. The rating agency also added that utility vehicle market could see a slightly subdued growth this year as compared to 2012, because diesel fuel rates are likely to increase soon in the country.

India Ratings has also pointed out the fact that low demand along with over capacity in passenger and commercial vehicle market could cut industry's profit margins by 1.5 to 2 per cent and 0.5 to 1 per cent, respectively. The highly competitive market is also identified as a possible reason for the projected mute growth in Indian auto sector.

With an estimated 13 to 15 per cent growth this year, the light commercial vehicles are most likely to fuel the sales in commercial vehicle segment. The total sales in the commercial vehicle space are expected to record an overall growth of 10 to 11 per cent during 2013. Further, India Ratings has said that medium and heavy commercial vehicle market could witness a 6 to 9 per cent drop in sales.