The Rs 4.5 lakh crore Indian automobile industry in Asia’s third biggest economy has shown a growth trajectory in practically every segment. With demand picking up post demonetisation and the Goods and Services Tax (GST) regime settling down, it is likely to clock double digit growth, say automobile honchos and analysts.

Significantly, in the first half of this financial year -- April-September 2017 -- the passenger vehicle segment registered a growth of 9.16 per cent at 16,30,945 units compared to the same period last year. Then, two-wheelers, comprising motorcycles and scooters, clocked a growth of 10.14 per cent at 10,507,308 units.

Commercial vehicles sales, a barometer of economic activity in the country, too jumped 6 per cent at 353,342 units, according to the latest data from the Society of Indian Automobile Manufacturers or Siam, the apex trade lobby.

Festival pull

Sales of tractors also soared by 21.2 per cent at 362,971 units which is 63,508 units higher. Interestingly, a festive pull in demand helped India’s biggest car maker by sales Maruti Suzuki, apart from Hyundai, Honda and Tata Motors which together command a little over two-thirds of the market out of 309,955 units: a growth of 11.32 per cent in September.

Maruti Suzuki, which sells one out of two cars bought in the country, reported sales growth of 9.6 per cent at 150,521 vehicles last month. In the July-September quarter, Maruti Suzuki’s sales also jumped to 18 per cent to 492,118 vehicles from a year ago period.

Sales of compact vehicles, which included popular Swift and Baleno models, rose 43.5 per cent, while sales of utility vehicles like Ertiga and Vitara Brezza climbed 27.6 per cent. Some of these models have a long waiting period and carry no freebies or incentives.

Maruti, which dominates the small car market in the country, has been expanding its offerings by launching more premium vehicles as competition heats up with newer and planned entrants such as Kia Motors and SAIC Motor Corp.

“While the passenger car industry in the country will post a decent growth this year, Maruti Suzuki will certainly grow double-digit,” RC Bhargava, chairman at Maruti Suzuki told Financial Chronicle. He said the growing car industry in the country would cross the 3-million historic mark clocked last fiscal.

“The second quarter has been in many ways the best quarter we have ever had,” Bhargava said. As per the second quarter performance in the ongoing financial year, on annualised basis, production would have crossed 1.7 million cars, which is way beyond 100 per cent capacity utilisation, he pointed out.

Bhargava said the company's profitability was driven by high capacity utilisation due to robust sales. “When you have capacity utilisation like we have now, every extra car we make adds to profit because of reduced overheads, including depreciation,” he said.

The company's sales in the period under review were at best in a quarter beating the previous record of 3,60,402 units in the fourth quarter of 2015-16.

Bhargava also said the most affordable car in the country today is Alto, which is attracting two-wheeler owners or a second hand car owner graduating to a new and affordable car.

Volume growth

“In the current fiscal, Diwali and Navratri festival advanced by two weeks which resulted in stellar volume growth in September and the momentum in likely to be maintained in October as well,” Subrata Ray, senior group vice president at Icra research, told Financial Chronicle.

Demonetisation-related shock punctured demand momentum in November and December last year, he said. “In the absence of any external shock, demand momentum is expected to remain strong in Q3FY18 on account of low base of last fiscal,” Ray said.

“We expect domestic passenger vehicle sales growth to grow by 9-10 per cent during FY2018 and we maintain a 9-11 per cent CAGR estimate over the next five fiscals,” he pointed out.

N. Raja, director and senior vice president, sales and marketing at Toyota Kirloskar Motor, said the company had sold over 6 per cent more cars in the first nine months of this calendar year in the country. “We expect the passenger vehicle market to end this fiscal with 7-8 per cent growth as we have to wait and watch how the market will move in the January-March 2018 quarter,” he pointed out.

Raja said the Diwali festival, which witnesses huge sales every year, was not positive for many manufacturers as prospective buyers had bought their vehicle ahead of the implementation of the GST regime. According to Siam officials demand for automobiles could slow in the second half of this fiscal year primarily due to slowing economy and rising fuel prices.

Earlier, Siam had projected passenger vehicle sales to grow by 8-10 per cent during fiscal 2017-18. Many auto analyst this paper spoke with said the year would end with below double-digit growth for the auto industry as a whole.