India
The passenger
vehicle (PV) industry is set for a swift recovery due to major demand
anticipated from upper-middle class population, said Manohar Bhatt, an auto
industry veteran for over 25 years, during an interaction with Emkay Research.
Manohar Bhatt
has extensive experience in sales, marketing and product planning functions at
OEMs such as Kia Motors, Maruti Suzuki (MSIL) and Hyundai. He said that the
income levels of upper middle class households have been hardly impacted by the
pandemic and there is pent-up demand due to the lockdowns. It would result in a
swift recovery. Besides there is healthy order-book and adequate finance
availability which should support a rise in demand. The industry upturn may
last for next 5 years and can reach 4.5mn units by FY26 (11% CAGR over
FY21-26E).
EV adoption is
expected over medium- to long term although at current prices, it is in favour
of ICEs. EV prices should reduce over time due to reduction in battery costs,
localization and scale benefits, making EVs attractive in comparison to ICEs,
resulting in better adoption. Initially, EV penetration is expected in higher
price categories, but success may be witnessed in lower priced categories as
well. According to experts, EV adoption would happen in two wheelers initially,
and then in PVs over the medium term.
There is huge
potential for car penetration in the long term as well. India’s car penetration
rate is very low in comparison to the developed markets. All India penetration
is also lower as compared to major cities and this provides an opportunity for
strong long-term growth. Growth in PVs is expected to be higher than two
wheelers in the long term.
Another
favourable factor is the demand for used cars. Online websites such as Cartrade
are beneficiaries of growth and improving organized share in the used car
market. The websites generate leads that are used by the dealers and smaller
OEMs like Volkswagen, Renault, Nissan, etc. for slow-moving products.
Source: Emkay Global Research
Image Source: Emkay Global Research
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