Automotive

In the last few years, the passenger vehicle industry was largely driven by strong economic growth. However, a host of domestic factors such as increasing fuel prices, the weakening rupee and prolonged high interest rates led to rising vehicle financing costs, leading to a slowdown in the demand for cars. While the demand for micro or small SUVs provided a boost to India's passenger vehicle market, passenger car sales fell during FY 2013 for the first time in a decade. Though manufacturers offered attractive repayment options and huge discounts to boost sales, the car industry faces the worst slowdown in a decade.

To keep pace with slowing demand and bridge the gap between sales and output, leading OEMs scaled back their production recently and block closures have become a regular theme in India. The market performance in India during 2009 and 2010 was underpinned by natural demand driven by the country’s economic performance, growing middle class and low levels of vehicle ownership. However, over the last couple of years, slow economic growth, rising petrol prices and high interest rates, have created strong headwinds for the Indian vehicle market. To make matters worse, the increase in excise duty on utility vehicles has dealt body blow on the growing SUV segment.

Considering these macro-economic challenges, PwC Autofacts has revised the long-term outlook for the Indian light vehicle market. The market is now expected to reach nearly 6 million by 2019, since India still faces significant hurdles on the road to greater levels of motorisation, which are likely to be resolved over a 10- to 20-year planning horizon.