Here is an infographic showcasing the market share of OEMs in the Indian domestic Passenger Vehicle (PV) segment in FY20.
After a healthy growth run over FY14-19 registering a CAGR of 6.2%, the domestic PV segment witnessed a sharp turnaround in FY20 owing to several concerns (NBFC crisis, weak rural income, rise in petrol and diesel prices, regulatory norms) plaguing the industry. The COVID-19 pandemic further deteriorated the volumes in March. The overall impact of this resulted in an 18% decline in volumes for the domestic PV industry.
Additionally, some of the players witnessed intense competition in their segment, for example, M&M who is a strong player in the Utility vehicle segment (part of PV industry) witnessed stiff competition from new entrants (Kia and MG Hector) resulting in market share loss of 80bps in FY20. The market leader Maruti largely maintained its market share due to its strong presence in the entry-level segment.
The growth outlook for the PV industry definitely looks promising but yet there remains a tinge of concerns as well. Firstly let’s look at the positives.
– Interest rates are heading lower thanks to a slew of rate cuts by the RBI in the recent past. Generally, PV industry does well in the low-interest rate scenario as nearly 80% of cars are financed
– The COVID-19 pandemic has definitely made people think twice towards shifting to personal mobility rather than public transport. There is no conclusive evidence until now that the shift is happening. But definitely, more people would be swayed towards personal mobility
– The rural economy which has been one of the biggest drivers of growth in the PV industry has remained largely unaffected as suggested by the strong growth in tractor volumes. Further, the normal monsoon and better sowing activity augurs well for the rural economy and thereby the PV industry as well
– The long-term growth story still remains intact with rising income levels, increased penetration of cars in India and higher affordability
Well there are some negative factors as well
– The petrol and diesel prices have been on the rise as the government looks to make up for the revenue lost due to COVID-19 led lockdown. And India, being a highly mileage sensitive market, this works as a deterrent
– While the regulatory norms (BS-VI and insurance cost) are behind us, there is still a lot of confusion or chaos in the mind of the consumer regarding possible GST rate cut on autos, EV vehicles adoption etc. This stalls the purchasing of the vehicle by the consumer
– Even though the economic situation has improved, the pandemic is still not over which raises the question of the sustainability of re-opening of the economy which will also hurt the PV industry
– The rural economy recovery is definitely a positive sign but questions are being raised now on whether it can last as the infections have now started to spread into smaller cities and villages. Plus, the government has limited fiscal space to support the rural economy
– The lockdown has impacted most businesses drastically and there is a strong possibility of down trading by the consumers, meaning, if a customer wanted to buy a Hyundai Verna will possibly down trade to a Hyundai i20 or Maruti Baleno.
Therefore, while there are positive signs for the PV industry, the above negative factors are also still playing around in the market. We hope you like it if you do please show us your love by sharing it with your near and dear ones. Below is the link.