Volume growth is gradually recovering in the passenger vehicle segment after a muted festive season, according to a report. What is helping the industry is triggers such as new products; pick-up in Kerala volumes; continued rural demand and a fall in fuel prices, according to a report.

The segment is expected to post a 5 per cent growth in volumes in the current financial year, says the report by Emkay Global Financial Services.

The festive season sales were marred by factors such as increasing cost of ownership, postponement of purchases during elections, lower volumes in flood-hit Kerala and selective financing by non-banking finance companies (NBFCs). However, channel checks now indicate expectations for a gradual improvement in volume performance. “Sales trends during the past three general elections indicate an improvement in volume performance after elections. In addition, pre-buying before the transition to BS6 norms is expected to support volumes. We expect volume growth to be back-ended in FY20, with 11 per cent growth,” says the report.

Despite price increases due to the transition to BS-VI norms, positive growth in the segment is expected from increasing financing ratio and a favourable macroeconomic environment. “In the past three emission norm changes, there has been positive growth after the transition has occurred. Cost increase is expected to be in the range of Rs 15,000-20,000 for petrol vehicles and Rs 60,000-80,000 for diesel vehicles. We expect volume growth to be positive in FY21, with a 6 per cent increase,” the brokerage said.