Forecast: India’s car sales to surpass 2.6M units; more affordable small cars and new demand
09 December 2010
A Business Monitor International (BMI) report forecasts that car sales in India will surpass 2.6 million units by the end of 2010, fuelled by an increasing number of affordable small cars and demand from less penetrated segments, such as rural areas.
Diwali celebrations and strong economic growth contributed to record car sales in India in October 2010. The 38% increase in car sales and 18% growth in commercial vehicle sales pushed total four-wheel vehicle sales for the first seven months (April to October) of the current financial year up 35% year-on-year (y-o-y). Although the levels of growth in October are unlikely to be sustained for the rest of the year to March 2011, BMI has revised its sales growth forecast for the financial year upwards to 25% for total four-wheel vehicles.
While rising raw material costs, which have led many carmakers to hike prices, provide a downside risk to the BMI forecast, Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers (SIAM) notes that the number of month’ salary required to buy a car is falling. BMI believes this will provide some insulation against rising costs, but cautions that it will depend on the future movement of input prices.
Reports that South Korean Hyundai Motor will enter India’s light commercial vehicle (LCV) market, although unconfirmed, reflect a growing trend of global carmakers moving into what is a high growth segment, the report says. While BMI forecasts growth of 17.4% for the whole commercial vehicle market in India in the current financial year ending March 2011, LCVs look likely to outperform the wider segment, with sales up 29.7% for the eight months to August on a calendar year basis.
In line with BMI’s core view that emerging markets will become global production bases, BMI expects sustained double-digit growth in total vehicle exports over the next five years, averaging 13%.
That is scary. There are already over 10million cars in India (who knows how many motorcycles, etc). with 2.6 million new ones this year and a strong growth rate, we are in trouble.
Even a 10% growth rate would give them an additional 50 million cars by 2020...and this year they had a 38% growth rate!!! Throw in the growth in China and the two of them together will easily pass up the US by the end of this decade.
It looks like we are already producing about as much oil as we can per year, and we're set to double the number of cars on the road world wide.
I hope we have EVs going quickly because there sure as hell isn't that much oil around. We won't even make it till 2015 without some serious problems in oil prices/supply. Don't kid ourselves, we have some serious world wide economic problems coming.
Posted by: DaveD | 09 December 2010 at 03:39 PM
2015? Try 2008. We'll see a repeat if we get a recovery which pushes demand for oil, throwing the economy back into recession; the only way we can grow is by making ourselves more petroleum-efficient and/or using substitutes for oil.
Posted by: Engineer-Poet | 09 December 2010 at 05:19 PM
If you think 2.6M is bad - what about China, which will sell 18M cars this year.
Are we slipping over the edge or already in free fall.
In the face of this, I am not impressed with some under-utilized, expensive train system in China That's like spraying Scotchgard on the Titanic's deck chairs.
And the criminally wasteful Fresno fiasco is totally appalling.
Posted by: ToppaTom | 09 December 2010 at 09:22 PM
Yes, I am very much afraid that the world economy now has a growth ceiling because of the price of oil. Everytime economic activity picks up, it will cause a self limiting spike in oil prices.
Posted by: DaveD | 10 December 2010 at 10:01 AM
Unless the economy uses oil much more efficiently, investing in high-economy vehicles and such first. This needs to be driven by pressures which don't go away if oil prices sag temporarily. Is a high tax on petroleum essential for economic recovery in the USA?
Posted by: Engineer-Poet | 10 December 2010 at 10:37 AM
The US has not changed the gas tax since 1993 and it has NOT been adjusted for inflation. We would rather sit and watch people be killed as bridges collapse than even have the common sense to raise it to adjust for inflation!
The chances of raising it to help ween us off of foreign oil and the $450Billion we will send out of the country this year which destroys our economy....ZERO.
We are addicts and we enjoy the abuse.
Posted by: DaveD | 10 December 2010 at 11:46 AM
Is raising gas taxes THAT (politically) unpopular?
Apparently it is.
But we are not pursuing the alternatives with much success either.
Posted by: ToppaTom | 10 December 2010 at 12:26 PM
Yes, raising gas taxes is INCREDIBLY unpopular. Irrationally unpopular.
Don't get me wrong, it would be insane to do anything that would raise taxes in a meaningful way for fuel in the US while our economy is messed up. BUT....
It is crazy not to set up a long term plan to at least have an inflation index so that we can maintain roads at the very least.
A sane plan would be to then eliminate ALL subsidies and tax breaks to oil companies. They are the most profitable companies in the history of the planet. They should not have their drilling platforms subsidized and their refineries subsidized. We already provide hundreds of $BILLIONS a year to them in "free" military support to keep their pipelines flowing through the middle east. Geez.
I'm not even talking about a tax increase yet...just simple sanity to stop giving these incredibly profitable companies yet more profits!!!
If you really want to make a difference without affecting the economy then plan for a long term, very slow but steady increase. Add 3 cents a year to the gas tax starting in 2012 or 2013. It lets companies and people plan now and KNOW what they will be dealing with. There will be time to shift to more rail for freight. To buy more fuel efficient cars.
That 3 cents a gallon would cost the average american $150 a year starting in 2012. That will not destroy our economy and allows us to start pricing oil to reflect it's affect on our economy and reduce the $450BILLION a year we send out of our economy.
Posted by: DaveD | 11 December 2010 at 06:56 AM
No, it's insane to subsidize "alternatives" to oil while subsidizing oil consumption via taxpayer-financed roads and other means. It's even more insane to continue these subsidies when we're out of money.
I'll take the contrarian view: increasing taxes on motor fuel is ESSENTIAL to a lasting economic recovery. Currently, the USA is barely creeping towards higher average fuel economy. Our systems still consume way too much oil to avoid recession when--not if--prices head up past the $100 mark again. A stiff fuel tax (even if not imposed immediately) would shift buyers toward vehicles which they can still afford to drive at higher prices and keep money from leaving the US economy, moving demand away from imported oil and toward things which produce domestic employment.
Posted by: Engineer-Poet | 11 December 2010 at 08:51 AM
At least make the tax a percentage rather than fixed. Control theory proponents will tell you that it makes the whole feedback loop stronger. As the price of gasoline goes up, so does the tax, because it is a percentage of the retail price. Every increase is felt even more and feeds back to people making purchase and behavior decisions.
Posted by: SJC | 11 December 2010 at 01:44 PM
DaveD makes some very good points.
We should be careful adding more taxes for ANYTHING at this time.
A tax that holds the price of gas at some fixed high level would provide consistent, predictable impetus to reduce imports.
Subsidies to the oil industry DO reduce our dependence on mid-east oil.
Posted by: ToppaTom | 11 December 2010 at 09:49 PM
Only "upstream", and arguably they only time-shift production earlier to times when the oil isn't worth as much. Subsidies to consumers like taxpayer-financed roads and the ethanol blender's tax credit promote consumption and increase dependency.
Posted by: Engineer-Poet | 12 December 2010 at 08:27 AM
It is obvious as India and China buy more cars and oil production is fixed that the supply will be constrained demand will increase and the price will go up. Oil is sold in U.S. dollars so as the bidding begins more dollars held by other countries will go into paying for oil from OPEC countries. This is not a good projected scenario for the U.S. but we continue to ignore these facts. Maybe some think that we will just go to war for oil, beside the fact that is immoral, it is just not sound thinking.
Posted by: SJC | 12 December 2010 at 09:07 PM