The Indian new vehicle market is so far performing largely in line with our expectations for the year ending March 2013. Our forecast for a better year for the passenger vehicle segment with growth of 9% is playing out with sales for April to July 2012 up 10.2% y-o-y. We expect much of the growth to come from the MUV segment, which will be sustained by new launches as the year goes on. Carmakers also have more diesel car models available to fulfil the high demand generated by high petrol prices. The biggest downside risk to this outlook, and our forecast for 12% growth in CV sales, is the potential for a hike in diesel prices before the end of 2012.
While passenger vehicle segment growth is steady, sales are being driven by a surge toward multi-utility vehicles (MUVs), which outsold their sedan counterparts in every price bracket for the first time ever in the first quarter of the financial year (April to June 2012). We believe the move toward MUVs is a combination of both the premiumisation trend, which BMI has highlighted as a core view for key emerging markets where existing car owners are looking for an opportunity to upgrade, combined with a better choice of products. According to Maruti Suzuki's Executive Director of Marketing, Shashank Srivastava, in the MUV/SUV segment, 'the market was always there, but there were not many options available'.
|Indian Vehicle Sales By Segment (CBUs)|
Steady growth is also a feature of the two-wheeler market, which registered growth of 9.75% in the April to July 2012 period. We do expect a slight slowdown in the segment's growth in the year ending March 2013, although 8.9% is still a healthy increase on the previous year and the projected volume of 14.6mn units is enough to attract bike makers and suppliers. Nevertheless, some domestic brands have started looking overseas for growth to offset any potential slowdown.
Bajaj Auto plans to increase its international output capacity by 15-20% in the current financial year ending March 2013. Africa will be an area of particular focus with assembly lines in Kenya, Ethiopia and Angola due to come onstream over the second half of 2012. This follows the recent openings of assembly lines in Mexico and Uganda. Similarly, Atul Auto has revealed plans for an assembly plant in Sri Lanka, echoing BMI's view that the country could become a viable alternative production hub for Asia. Initially the plant will assemble completely knocked down (CKD) kits in partnership with a local firm. However, BMI's suggestion that Sri Lanka could become a full production hub in the future is predicated on the availability of raw materials such as rubber-based products and textiles.