Mumbai: The domestic passenger vehicle (PV) industry's volumes are likely to grow by up to 7 percent this financial year, riding mainly on first-time buyers, according to a report by ICRA.
"Indian PV industry's domestic volumes are likely to grow 5-7 percent in FY16, supported by return of first-time buyers, replacement demand owing to a large base of FY10-FY11 and planned aggressive new model launches in the compact UV segment," ICRA said in its latest research update on the passenger vehicle Industry.
But the luxury car market, it said, would grow faster at 15-20 percent this fiscal.
ICRA study also predicts that some 1,80,000 Indians are estimated to be millionaires and this category is expected to grow at a rapid clip, offering attractive growth potential for global luxury car original equipment manufacturers (OEMs).
There is a strong correlation between incremental affluent households and luxury car sales, and ICRA expects the luxury car segment to triple in volume from the current level by 2022.
ICRA said that despite improved sales the industry's profitability is unlikely to see much improvement in the near term mainly due to recurring expenses towards new product development, increase in employee costs and likely sustenance of discount-led sales push.
Restricted pricing power in the wake of intense competition and currency headwinds will also restrict profits, it added.
Over the medium term, ICRA expects the PV industry to revert to an annual growth of 8-10 percent, for both the domestic play as well as exports.
The market share in the domestic PV segment is expected to remain concentrated, with top five players constituting over 80 percent of the overall market, it said.
