Despite high fuel costs, car sales in India top emerging markets charts

Key highlights:

• Indian car sales will remain robust, growing 9% this year and 7% in 2018
• Roll-out of GST in July prompted automakers to lower the prices of their passenger vehicles
• This has encouraged dealer restocking and has led to a subsequent boost in sales

Car manufacturers in India are expected to see a robust growth in 2017 and 2018. Indian car sales will remain robust, growing 9% this year and 7% in 2018, according to a recent Moody’s report.

The report further said that the government’s roll-out of the goods and service tax (GST) in July, which replaced a web of indirect taxes in India, prompted some automakers to lower the prices of their passenger vehicles.

However, this has encouraged dealer restocking and has led to a subsequent boost in sales, it added.

It said that going ahead it expects India’s automobile sales in 2017 to touch the 3.6 million units mark. This will be on the back of new model launches by domestic as well as international automobile companies and a seasonally stronger second half due the festive season sales.

The Moody’s report said that the performance of Tata Motors should largely mirror this positive sentiment in the market.

The growth expectation of the Indian automobile market is more than that of emerging markets such as Brazil and Argentina which are projected to post a combined sales growth of 6% in 2017 and 7.1% in 2018 (to 3 million units).

However, this is a recovery in their growth as their sales had plunged by 13.6% in 2016.

Similarly, Russia’s modest economic recovery should help auto sales return to its growth path after dropping by about 11% in 2016.

“We expect Russian light vehicle sales to jump 8% this year and 10.4% in 2018 to reach 1.7 million units - up from the recent trough of just 1.4 million in 2016, but still far below the 2.9 million units sold in 2012,” said the report.

Even Japan’s growth in the automobile market is expected to lower at 5.6% in 2017. This will be due to the return of Nissan and Mitsubishi to the mini car segment after the exit from the segment in mid-2016 due to allegations that Mitsubishi had conducted fake mileage tests.

Chinese automobile market growth is expected to slow down in 2018 as the tax cuts on the purchase of small engine passenger vehicles will come to an end. Moody’s expects this market to grow by a modest 2% in 2018 to 29.4 million units.