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India may outpace China in car sales growth, says Moody's Ratings
Moody's Ratings on Tuesday said India's car sales are likely to grow at a compound annual growth rate (CAGR) of 3.5 per cent, outpacing China, Japan and other major Asian economies, and reaching around 5.1 million units per year by the end of this decade.
'We project a CAGR of 3.5 per cent for car unit sales in India through 2030, faster than growth rates in China, Korea, and Japan in the same period,' it added. India is the world's third-largest automotive market after the US and China.
The EV bandwagon
The country's carmakers are also betting big on manufacture of lithium-ion cells, electric vehicles (EV) and batteries through a cumulative investment of $10 billion, despite the lower EV penetration of 2 per cent now.
'We estimate that if 9-10 per cent of two-wheeler owners upgrade to entry-level cars, it would create replacement demand of at least 1.6 million-1.8 million entry-level cars through the end of the decade. Annual car sales, which have averaged around 3.1 million over the last 10 years, and replacement demand will also underpin sales growth through 2030,' the report said.
'These assumptions alone support our view that India will grow to be a 5 million car market by the end of the decade,' it added.
This will be a jump of almost 25 per cent from 4.2 million units in 2024.
Rise of domestic majors
At present, Japanese, Korean and Chinese companies, which operate in India through joint ventures and subsidiaries, together account for more than 70 per cent of the market.
However, domestic majors are rapidly increasing their share.
In 2015, Indian carmakers -- Tata Motors, and Mahindra & Mahindra -- held a modest 11 per cent share of the market. It is 24 per cent now.
Other market gainers include Korea's Hyundai Motor Company (and its associate Kia Corporation, collectively Hyundai Motor Group) which increased its combined market share to 20 per cent in 2024 from 18 per cent in 2015.
Chinese carmakers do not have a significant presence in India. In 2024, they had a market share of around 1 per cent.
Meanwhile, Japanese automakers have lost share in India after dominating the market for years. The collective share of Japanese car makers that operate in India through subsidiaries and joint ventures -- Honda Motor, Nissan Motor, Suzuki Motor Corporation and Toyota Motor Corporation -- fell to 51 per cent in 2024 from 61 per cent in 2015, the report said.
India's overall car industry has grown by a significant 60 per cent to 4.2 million units in 2024 from 2.6 million in 2015.
A low car penetration rate also highlights the significant growth potential of India's expansive domestic market.
There are only 44 vehicles per 1,000 people in India, much lower than penetration rates in Japan (502 vehicles), Korea (422), China (251) and Indonesia (76).
'Strong growth potential makes India a key part of both domestic and foreign automakers' growth strategies. The country's young and growing population, coupled with increasing disposable incomes, supports strong demand for personal transportation,' it added.
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