Car sales in India may grow by a 3.5per cent compound annual growth rate (CAGR), resulting in a volume of 5.1 million units by 2030, the highest in Asia, as automakers roll-out new internal combustion engine (ICE) and electric vehicle (EV) models, according to Moody’s Ratings.
The credit ratings firm added that India’s conventional, or the ICE segment, will remain lucrative for global automobile companies even as they pursue electric vehicle (EV) opportunities in other regions.
India will continue to be a key market for global automakers in the coming years on account of its growing working-age population, increasing incomes, and the country’s positioning as an export base, said Moody’s.
The Indian car market, however, is characterised by stiff competition, with multinationals – including Japanese, Korean, and Chinese automakers – making up over 70% of the market through joint ventures (JVs) and subsidiaries, while homegrown companies account for only about a quarter of sales.
The multinational OEMs leverage their global product lineups to gain a competitive advantage in India, the report said.
Global trade tensions
India’s fledgling car market has been traditionally protected by high import tariffs, but the recent trade negotiations, particularly a free trade agreement (FTA) pact with the UK, indicate that the government is under pressure to open up the domestic market.
Moody’s said that India’s transition to electric vehicles (EVs) is still in early stages despite strong consumer demand. It found that certain OEMs, such as Tata Motors and Hyundai, are focusing on battery EVs, while Honda plans to roll out plug-in hybrids.
It estimates that automakers may invest over $10 billion through 2030 to enhance their competitiveness in the EV segment, a move that may impact their free cash flows.
Automakers face pressure to electrify their vehicle lineups in China, Europe, and the US to meet emission targets. By contrast, the combination of India’s significance as an export hub and its high-growth conventional market reinforces its importance despite the slow adoption of EVs locally.
While EV profitability is expected to remain modest in most markets, India’s demographic dividend and consumption growth will continue to support demand for conventional vehicles.
(Source: Business Standard)
