India's domestic passenger vehicle market is likely to grow at compounded annual growth rate (CAGR) of 13.9% over the next five years with the small car segment driving growth, a survey said.
"The domestic passenger vehicle sales will accelerate at a CAGR of 13.9% from 1.55-million units in FY'09 to 2.98 million units in FY'14," a Credit Analysis and Research (Care) ratings survey said.
There would be an increasing preference for utility vehicles for personal use which would drive the segment's growth, it said.
According to the survey, the small car segment is likely to clock a CAGR of 15.8% from 0.94 million units in FY'09 to 1.95 million by end-FY'14.
Lower excise duty of 8% on small cars (mini and compact) as against 20% for big cars would largely contribute to the higher growth of small cars, the survey said.
The mini-segment sales will grow at a CAGR of 40% from 49,383 units in FY'09 to 2,65,803 units by the end of FY'14.
However, the compact segment sales will rise at a CAGR of 13.7% from 8,88,676 units in FY'09 to 16,80,349 units in FY'14, it said.
According to the survey around 5.5-million households (70.3% of the addressable households) can afford to own a car with on-road price not exceeding Rs3,50,000 (FY'09 prices). This segment can afford a small car, it said.
On account of income increasing fast among the lower mid-income masses, around 7.2% or approximately 16.8 million households of the total projected 232.6 million households are expected to afford a car in FY'14, it said.
Passenger vehicle exports are likely to grow at a CAGR of 22% from 3,35,739 units in FY'09 to 9,09,000 units by end-FY'14.
Passenger car exports will accelerate at a CAGR of 22.1% from 3,31,539 units in FY'09 to 9,00,000 units in FY'14, fuelled by small car exports, the survey said.
The export momentum in the utility vehicle industry would pick up over the next five-years, with UV exports expected to increase from 3,040 units in FY'09 to 7,500 units in FY'14.
Multi-Purpose Vehicles exports would grow to 1,500 units by FY'14 from the current level of 1,160 units, the survey said.
The domestic MPV sales are likely witness a CAGR of 10.4% from 1,06,607 units in FY'09 to 1,74,819 units in FY'14.
The operating profit margin of the passenger vehicle industry is expected at 14-15% in FY'10 as against 5% in FY'09.
The survey also forecast that the operating profit margin of the passenger vehicle industry would dip marginally to 11-12% in FY'11 due to rise in prices of raw materials.
Steel prices would average Rs41-42 per kg in FY'10-11, a 10% jump from Rs38 per kg in FY'09-10. The prices of the other inputs like plastics (crude-oil derivatives) and aluminium are also expected to harden, the survey said.
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