Indian car market may grow to 3 million by 2015, says Sehgal

Pune: Indian car market, which is insulated from global meltdown pangs, is expected to show a marked rise in the midterm, as the country is one among the emerging economies that are growing at the rate of 5 per cent or more annually.

Vikas Sehgal, partner in the internal strategy consulting firm Booz & Company (formerly part of Booz, Allen Hamilton), told TOI that irrespective of the present problems the automobile sector in the country is in the positive trajectory. "If the country's Gross Domestic Product (GDP) grows 6-7 per cent, as are the indications, the automobile market will certainly grow at 10-12 per cent," Sehgal said. He, however, observed that the personal mobility choices will move towards motorcycles and cars, sidelining the scooter segment and wiping out the three-wheeler segment altogether.

The gap between the prices of scooters and second-hand small cars is closing. Besides there will be products such as Tatas' Nano which will make basic scooters unattractive, Sehgal said. Commenting on the future of the commercial vehicle sector, Sehgal said the days of owner-driven commercial vehicles are nearing an end and in future, the fleet owners will dominate the scene including the design of the vehicles and their configuration according to intended use. Smaller players such Ashok Leyland will have to devise lean strategies such as outsourcing the manufacturing of its truck engines and other assemblies, he added.

The Indian car market, currently at about 1.7 million units, is expected to grow to 3 million by the year 2015, Sehgal said. That's the size of Germany's car market, he pointed out. In the run up to this growth, however, it will be an imperative for the Indian carmakers to scale up their production and improve technology, failing which they face the risk of being wiped off by the advanced options offered by global companies, Sehgal said.

According to Sehgal, the car market in India will see a major expansion in the mid size B segment while the small car segment will grow at an unexciting speed. In the scenario where India will produce 3 million cars, Maruti and Hyundai are expected to dominate the market with a share of 1 million each, he said. Others such as Honda, Volkswagen, Mercedes or BMW will grow too, in their own niches, he said, adding that Indian players such as Mahindras or even Tata Motors are likely to be relegated if they don't get their act together quickly. Expressing serious concerns about Bajaj Auto's plans to enter the car segment, Sehgal said the idea appears to be a 'long shot.'

On the components front, Sehgal said the global big players such as Delphi or Dentsu will eventually set up Indian bases as, at market size of three million, they will be interested in being tier one suppliers here. The current Indian players in the components space - most of whom are family owned - will be challenged and in any case can survive only as tier two or tier three vendors, he said.

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