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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