The car industry in India has been on steroids. The domestic sales have reached a level of 2 million units per annum, growing in double digits. We expect it to rise further to 3.66 million units by 2014-15 and 5.2 million units by 2019-20. The past six years have seen explosive growth and sales during this period account for over 8.5 million cars, which is as much as 60% of the total car stock in the country. Indians today buy nearly 10 times the cars they used to buy 15 years ago. The current stock of cars running on the streets are of the order of 13 million, of which as many as 8.5 million were added during the past six years. India is set to add another 35-38 million cars to its stock during the next 10 years. Over the past decade, India has increased its share of world cars from 1.3% to 3.3%. India is likely to go through an exponential growth phase similar to the one experienced by China and by 2020, its share of world car sales is likely to be to touching 9%. The total world car sales, meanwhile, are not likely to increase by much. The current market is of the order of 50 million cars and through the next decade it is not likely to exhibit a decadal growth of more than 10%. In fact, most of the large consuming countries are in decline and are unlikely to reach their peak consumption levels for a long time to come. From a marginal player in 2000, India is likely to emerge as one of the top five car buying nations, second only to China among BRIC nations. It already is a significant player with a domestic market growing at a fast clip. This will attract major players into specific segments of the Indian market and competition will only intensify further. The key competitive action will be in the upper end of A2 segment and the A3 segment, which will comprise the bulk of the market in a price range of Rs 4,00,000 to Rs 10,00,000. This is not to say that other segments will not see action; it is just the fact that consumers of these segments will drive the industry. Mid-size is the trend The clear trend established is that the entry-level segment has shrunk to under 10% of the market. With a renewed focus on low-cost cars, this segment will continue to grow in volumes, but its share of market is unlikely to increase. The bulk of the market has been driven by the A2 compact segment, which will continue to drive the growth and is forecast to have over two-third market share right through to 2020. The mid-size segment (A3) has been growing steadily and is now one-sixth of the market. It will continue to expand faster than the market and is expected to be over one-fifth of the market by 2020, which implies that its volumes will grow to over a million units per annum from the current level of about 3,00,000. The coming decade will belong to this segment, just as the preceding decade belonged to the A2 segment. The luxury segment will continue to be under 1% of the market. Consumers As many as 29% of SEC A households own a passenger car, However, in the segments SEC C, D and E, the penetration rates are still in single digits. SEC B has reached double digit penetration. The total penetration of cars in urban households is only 9.4%, which means less than 10% of the households in urban India own a car (rural penetration is about 2-3%). Even with growth forecast, the total penetration of cars is likely to remain below 25% for urban India and in single digits for rural India by 2020, which implies that the Indian car market is not going to saturate for at least another 25-30 years. The key markets where cars are selling in large volumes are depicted in the figure on the bottom. There are no centre-wise sales. The data pertains to financed cars by individual buyers only. Many cars are procured without financing and many are purchased by institutional buyers (companies, government, etc). However, the figures are fairly representative of the spread. What is driving the demand? Income: Rising in

1. Source Financial Express

2. The car industry in India has been on steroids. The domestic sales have reached a level of 2 million units per annum, growing in double digits. We expect it to rise further to 3.66 million units by 2014-15 and 5.2 million units by 2019-20. The past six years have seen explosive growth and sales during this period account for over 8.5 million cars, which is as much as 60% of the total car stock in the country. Indians today buy nearly 10 times the cars they used to buy 15 years ago. The current stock of cars running on the streets are of the order of 13 million, of which as many as 8.5 million were added during the past six years. India is set to add another 35-38 million cars to its stock during the next 10 years.

3. Over the past decade, India has increased its share of world cars from 1.3% to 3.3%. India is likely to go through an exponential growth phase similar to the one experienced by China and by 2020, its share of world car sales is likely to be to touching 9%. The total world car sales, meanwhile, are not likely to increase by much. The current market is of the order of 50 million cars and through the next decade it is not likely to exhibit a decadal growth of more than 10%. In fact, most of the large consuming countries are in decline and are unlikely to reach their peak consumption levels for a long time to come. From a marginal player in 2000, India is likely to emerge as one of the top five car buying nations, second only to China among BRIC nations. It already is a significant player with a domestic market growing at a fast clip. This will attract major players into specific segments of the Indian market and competition will only intensify further. The key competitive action will be in the upper end of A2 segment and the A3 segment, which will comprise the bulk of the market in a price range of Rs 4,00,000 to Rs 10,00,000. This is not to say that other segments will not see action; it is just the fact that consumers of these segments will drive the industry. Mid-size is the trend The clear trend established is that the entry-level segment has shrunk to under 10% of the market. With a renewed focus on low-cost cars, this segment will continue to grow in volumes, but its share of market is unlikely to increase. The bulk of the market has been driven by the A2 compact segment, which will continue to drive the growth and is forecast to have over two-third market share right through to 2020. The mid-size segment (A3) has been growing steadily and is now one-sixth of the market. It will continue to expand faster than the market and is expected to be over one-fifth of the market by 2020, which implies that its volumes will grow to over a million units per annum from the current level of about 3,00,000. The coming decade will belong to this segment, just as the preceding decade belonged to the A2 segment. The luxury segment will continue to be under 1% of the market.

5. The future * The competition is likely to intensify, benefiting consumers * Improved public transport is likely to impact the two-wheeler segment rather than the four-wheeler segment * The economy is set to enter a higher growth path, leading to people graduating to higher income groups at a faster rate * All the factors that drove demand are set to strengthen further Clearly, the first three segments (A1-A3) are today affordable to a vast number of people and these numbers are set to increase. The large explosion is also having a big impact on the used car market. Organised players in this space are making reconditioned cars available at extremely attractive price points. The pioneers in this arena have been Maruti True Value and First Choice India promoted by Mahindras. Carnation, promoted by Jagdish Khattar, is another venture, which, among other things, offers a platform for used cars sales (Carnation-certified pre-owned cars come with warranty and free services).