India’s passenger vehicle sales set to gain further momentum

Passenger vehicles sales in India have been on a steady growth path since FY22 and are expected to close the ongoing fiscal with 6-8% growth. A growing middle class, an increase in disposable incomes and a low penetration ratio have been fuelling the growth, finds out Shally Seth Mohile.

Why do passenger vehicle sales in India continue to advance?

After a historic 27% growth in FY23 with 3.9 million units sold, passenger vehicle (PV) sales in India are expected to grow at a moderated pace of 6-8% in FY24, according to an Olx Crisil Mobility report. Over the long term (5-year period), a healthy growth rate of 5-7% CAGR is projected. India’s PV sales continue to advance at a brisk pace. For the third straight year, most other markets, which have seen sales inch up year on year, are still struggling to reach the pre-pandemic levels. For the first time ever, in all months of the calendar year 2023, car dispatches were in excess of 300,000 units.

So, what explains the continuous growth?
A growing middle class with increasing disposable income is creating a larger pool of potential car buyers and feeding into the demand for feature-rich models prompting new model launches. A total of 42 new models – including 23 new ones and 19 facelifts – have been introduced in the market in the first 11 months of the calendar year, shows data compiled by JATO Dynamics. In addition to the consistent pace of new model launches that have sustained buyers’ interest, a low car-penetration ratio compared to most of the global car markets has been fuelling sales.

How is India’s car penetration ratio?
At 24 per 1,000 people, India’s car penetration ratio, which compares poorly with the world average of 314, in 2022, is the third lowest among the top 13 markets, according to World Road Statistics 2023 International Road Federation and Crisil Market Intelligence & Analytics. Italy with a penetration of 673 per 1,000 people has the highest ratio, followed by 583 in Germany and 559 in France. Data shows that even the state-wise car penetration in India is low due to a low per-capita income. With exception of Delhi, where car penetration stands at 103, in most of the other states the penetration is below 40 per 1,000.

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