Car sales expected to be less than one million units in 2005-06

CHENNAI, NOV. 18. According to a report prepared by CRIS INFAC, the demand for passenger cars is expected to grow at a rate of 9.3 per cent per annum, to 8.94 lakh units in 2005-06. The annual sales of cars would thus be much lower than the initial expectations of the new car manufacturers. During the 1995-97 period, several new car manufacturers set up large capacities, based on an estimated demand of one million units by 2000-01.

According to an earlier report of CRIS INFAC dated December 1995, the demand for cars in 2000-01 was forecasted to be at 5.80 lakh units, much lower than some other industry and analyst estimates. The actual sales of cars in 2000-01 were 5.72 lakh units.

The combined sales of cars and utility vehicles are expected to be just above one million units in 2005-06. According to CRIS INFAC estimates, the utility vehicles segment is likely to grow by nine per cent, resulting in a demand for 1.67 lakh units in 2005-06, as compared with 1.09 lakh units in 2000-01.

CRIS INFAC has projected the demand after considering various factors that affect the demand for vehicles, such as price of the vehicle, income levels, availability of finance options, wider choice of models, replacement and scrappage rates, and government policies.

According to the report, the annual income needed to buy an entry-level new car in India is likely to increase from around Rs. 3.20 lakhs in 2000-01, to around Rs. 4 lakhs in 2005-06. A comparison between the economies of a petrol and a diesel car shows that the annual cost of ownership of both is almost the same.

The report also compares automobile companies in terms of strategies, cost structure, profitability, volume sales, and market position. With the increasing presence of several multinational players, the cars and utility vehicles sector in India is expected to become increasingly competitive.

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