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Customer LoginsSame-Day Analysis: Aided by new launches, cars win market share from utility vehicles and vans in India during 2015
Automakers in India plan to introduce new crossovers and compact SUVs in 2016, meaning that utility vehicles are expected to make a strong comeback after a weak 2015.
IHS Automotive perspective
- Significance: Passenger vehicle sales in India grew at a phenomenal rate of 7.7% during 2015 to 2,772,705 units. This growth was almost entirely driven by strong demand for cars, while sales of utility vehicles and vans underperformed.
- Implications: As a result of the strong growth in demand, cars accounted for 73.4% of the passenger vehicle market in 2015, marking a significant improvement from its share of 72.1% in 2014. However, utility vehicles' share declined to 20.4% from 21.2% in 2014, while vans' market share shrank to just 6.2%.
- Outlook: The situation is likely to change as automakers focus on launching crossovers and compact SUVs in 2016. IHS Automotive expects new utility vehicles to provide the passenger vehicle market with a boost of nearly 187,000 units this year.
After disappointing sales in the previous couple of years, 2015 turned out to be a better year for automakers in India. Passenger vehicle sales in India grew at a phenomenal rate of 7.7% during 2015 to 2,772,705 units, according to data released by the Society of Indian Automobile Manufacturers (SIAM). This marks the best ever sales figure for the market, surpassing the previous high of 2,760,429 units in 2012. The growth was impressive given that it came against the backdrop of the withdrawal of excise duty benefits that the government had offered in 2014 to stimulate demand.
The sales growth in 2015 was almost entirely driven by strong demand for cars, while sales of utility vehicles (UVs) and vans underperformed. Sales of cars, aided by several new launches, jumped 9.6% to 2,033,975 units last year, marking only the second time that the market surpassed the 2-million-unit mark after 2012. As a result, cars accounted for 73.4% of the passenger vehicle market for the full year, a significant improvement from its share of 72.1% in 2014. While the absence of excise duty benefits was a headwind, sales in the category grew strongly thanks to several new model launches during the year.
In contrast, sales of UVs grew at a more moderate rate of 3.6% y/y to 565,638 units in 2015. This caused the category's market share to decline to 20.4% from 21.2% in 2014. Despite new model launches, the category suffered as diesel fuel continued to fall out of favour among buyers. Meanwhile, sales of vans grossly underperformed the overall passenger vehicle market, registering a marginal gain of 0.6% to 173,092 units. This reduced vans' market share from 6.7% in 2014 to just 6.2% last year.
Outlook and implications
As indicated above, several factors contributed to the demand pattern that emerged in India during 2015. Passenger car sales were aided by new model launches including the Renault Kwid, Honda Jazz, Suzuki Baleno, Ford Figo, and Tata Bolt hatchbacks, among others. Meanwhile, Ford's Figo Aspire joined the growing list of compact sedans that already included offerings from Maruti Suzuki, Hyundai, Honda, and Tata. Some of these launches proved crucial for automakers as buyers demonstrated an increasing tendency throughout the year to prefer new models over old ones.
Aside from these new launches, new regulations helped the passenger car category win market share from UVs. These included the deregulation of diesel fuel - a process that was started in a phased manner a couple of years ago. As a result of the withdrawal of subsidies on the fuel, the attractiveness of diesel - often the default choice for sport utility vehicle (SUV) buyers - diminished greatly during the year. Another massive jolt came towards the end of the year when the Supreme Court of India temporarily banned certain diesel vehicles in the National Capital Region (NCR). The court directed the authorities to stop registrations of diesel vehicles powered by engines in excess of 2000cc until March 2016. The move was designed to reduce pollution in the capital city, which is among the most polluted cities in the world. Although the decision is limited to a specific region, it has sent out the message that diesel is not a clean fuel. Meanwhile, a poor monsoon season last year curbed demand in rural markets where large UVs are preferred.
However, the situation is likely to change in 2016. The softness of retail fuel prices, stemming from the fall in global crude oil prices, is likely to support vehicle sales throughout the year, while falling interest rates are also expected to have a positive effect. On the new launch front, automakers will focus on crossovers and compact SUVs. Some of these will be launched or showcased at the upcoming New Delhi Auto Expo in February. Among the important vehicles lined up for their market introduction this year are the Suzuki Vitara Brezzam, the Mahindra & Mahindra KUV100, the Honda BR-V, the Tata Nexon, and the Volkswagen Tiguan. IHS Automotive expects these new nameplates to provide the passenger vehicle market with a boost of nearly 187,000 units in 2016.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.