The Indian light vehicle market will grow four times faster than the global average, says S&P Mobility.
14 Sep 2024 | 5812 Views | By Ketan Thakkar, Prerna Lidhoo
Amid concerns about rising inventory and a slowing market in the short term, global consultancy firm S&P Mobility has guided that India’s market will remain the fastest-growing in the coming decade and breach 7.5 million units of light vehicle production by 2030.
Gaurav Vangaal, Associate Director of S&P Global ...
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Amid concerns about rising inventory and a slowing market in the short term, global consultancy firm S&P Mobility has guided that India’s market will remain the fastest-growing in the coming decade and breach 7.5 million units of light vehicle production by 2030.
Gaurav Vangaal, Associate Director of S&P Global Mobility, in an internal company webinar, projected the Indian market to grow by a CAGR of 4.75% in the coming decade (2023-30), much faster than in recent years, backed by a growing economy and under-penetrated market. This is much faster than the 1.1% CAGR at which the global light vehicle market is set to grow during the same timeframe. “There is an opportunity to grow. India showed stability in uncertainty during Covid-19. We expect a high GDP growth of 6% against the expected global GDP growth of 2.5% in the coming decade. With growing consumer per capita and low penetration, the market will outpace global markets,” said Vangaal
According to S&P, both Indian vehicle makers and parts makers are making significant investments, and the capacity is set to grow to 10 million by 2031 from around 6 million at present. Covid-19 and the resultant semiconductor crisis is estimated to have set back the global light vehicle market by over a decade. The global automakers produced approximately 95 million light vehicles per year preCovid-19; it will take another few years for the industry to regain its previous peak and hit 97 million by the end of the decade. “The Indian market grew by a CAGR of 4.1% between 2013 to 2023. The market is also expected to outperform in the next ten years. This is one reason why India is actively in focus amongst global car makers,” Vangaal added.
Vangaal, who specialises in vehicle production forecasting, believes that multinational corporations are increasingly considering India a key market and a potential export base. Currently, the most significant conversation among global car makers is how India can bridge the gap in the global supply. “There is a gap in the global supply chain, and every global vehicle maker is looking for an alternate supply base. India is seen as one of the more stable manufacturing bases. Despite the disruption in eastern Europe and Russia, and the Middle East conflict, India will remain stable due to its nonaligned nature,” added Vangaal. While tariffs on Chinese imports are increasing in the US and the EU, global car makers are increasingly considering an alternate sourcing base for EVs or internal combustion engine vehicles.
Electric Vehicles On electric vehicles (EV), S&P Mobility forecasts the penetration of EVs on BEV platforms to move from 1% at end-2019 to 54% by 2035. But, the global market is experiencing disruption and transformation. He says the adoption curve is under pressure due to the lack of adequate infrastructure globally. “We lack an ecosystem in India, and there is uncertainty over the residual value. The higher manufacturing costs increase the hurdle rate in adoption. The rollback of support globally will also impact global volumes — which means the transition to an electric future will take longer,” added Vangaal.
Car makers are extending the lifecycle of their internal combustion engine platforms and adapting them to meet future ICE requirements. The next-generation platforms will be multi-energy platforms, which can carve out both ICE and EVs, asserted Vangaal. “While EVs are inevitable in the long run, there is a significant opportunity with hybrids in the interim. We expect the penetration of hybrid and plug-in hybrid vehicles in the future. We don’t expect substantial investment in ICE vehicles, but we will see many multi-energy platforms emerging,” Vangaal said.
The multi-energy platform, however, is merely a bridge to an all-electric future, he added. “The role of multienergy platforms will start slowing down after 2030 as vehicle makers race to meet new regulations worldwide,” he noted. S&P Mobility’s forecast states that the share of global internal combustion engines will drop to 35% by 2035.