Auto industry likely to continue on its growth path: Report

The Dollar Business Bureau

India’s auto sector, which witnessed a revival in 2016 after two years of instability, is set to keep the momentum in 2017 with demand to pick up across all categories, according to a report.

The auto industry growth is likely to continue this year across all vehicle segments – passenger, commercial and also two and three-wheelers. However, it is unlikely that the sector will see the sales growth of last year because of the impact of demonetisation and uncertainty with regards to the Goods and Services Tax (GST), revealed a report by Dun & Bradstreet (D&B).

Last year, auto sales increased 9.2% led by two-wheelers which grew by 9.6% from 0.7% compared to a year-ago. In the meantime, cars segment clipped at 7% and commercial vehicles increased 7.8%.

“Improvement in economic growth, strong demand from semi-urban and rural markets and low cost of ownership have led the sales in 2016 bring in the much needed revival in the industry, after the growth fell in 2015,” said the report.

Sales in the sector will also be supported by higher demand for replacement as a result of the proposed implementation of new norms on emission and deferred purchases due to the note ban, the report adds.

However, the report added that the sector’s recovery will take around 2-3 months more as customers are still hit by demonetisation. As a result, although the mid-term to long-term prospects seem positive, on account of the impact of note ban and the uncertainty with regards to GST, the sector may not maintain the growth figures achieved in 2016.

The positive sentiment is led majorly by the semi-urban and rural demand for cars and two-wheelers, in the wake of good monsoons. The 7th pay commission will give another boost which will infuse about Rs.1.02 trillion in disposable income for more than 1 crore employees.

In addition, another reason for a boost in sales is the aggressive expansion policies by the cab aggregators.