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Raghuvir Srinivasan

PASSENGER car sales have set a scorching pace this summer. The first quarter ended June 30 saw a 28 per cent growth in sales volumes; the highest since the first quarter of 1999-00 when the industry ran up a sales growth of 30 per cent. In sheer volume terms, the 1.93 lakh cars and utility vehicles sold in the April-June period ranks as the highest in the last eight (see graphic).

The sharp ramp up in volumes in recent times has car manufacturers salivating as they foresee at least a double-digit growth rate for 2003-04, if not one in the high teens. Even as car manufacturers are busy hatching plans to capitalise on the anticipated uptrend it may be interesting to look at historical data to project the likely growth for the current fiscal year.

An analysis of the last six years since 1997-98 shows that the average contribution of the first quarter to total annual sales volumes is about 22.8 per cent.

In other words, the total annual sales volume of passenger cars and utility vehicles has, on an average, been about 4.39 times the volume registered in the first quarter. Going by that measure, 2003-04 should see sales volume of about 8.47 lakh vehicles. That would be a growth rate of 19.7 per cent compared to 2002-03.

Now, arithmetic aside, is this an attainable number from a practical, market viewpoint? There are many who think that this may be too optimistic an assessment.

A more reasonable assumption, according to them, would be a growth of 10-12 per cent for the whole year. This means that sales have to slow down considerably in the remaining nine months of this fiscal year as the industry has already run up a 28 per cent growth in the first quarter.

Yet, looking at the current state of the market and the overall economic environment, it will not be surprising if passenger car sales end up with a growth rate in the mid- to high teens this fiscal. Just look at the factors supporting this premise.

By most indications, we seem to be enjoying a fairly good monsoon that should see agricultural activity picking up with its obvious favourable impact on the other sectors of the economy. The impact of a good monsoon on overall economic sentiment cannot be underestimated.

Second, look at the way car manufacturers are flooding the market with new models and variants. In the last three months Hyundai re-launched the Santro (Xing), and General Motors came up with two new models — Corsa Sail and the Chevrolet Optra.

General Motors looks set to launch at least two more models before the year runs out and if market gossip is to be believed, one of them could be the Daewoo Matiz on its comeback trail albeit under a different brand name. Ford India has, for its part, come up with yet another variant of the Ikon, the NXT Sxi. Meanwhile, Tata Engineering is scheduled to launch an estate version of the Indica even as it continues to push volumes in the Indigo, which is already the top-selling model in the C segment.

Experience shows that the market has expanded to accommodate new models, especially in the mass-market category. The year 1999-00 is a good example. That was the year Indica entered the market, and together with the Matiz and the Santro expanded volumes to record levels.

And then, there is the re-invigorated Maruti Udyog flooring the pedal in its best-selling model, the 800.

The first quarter saw a whopping 63 per cent growth in volumes of the 800cc entry model. One can safely assume Maruti will aggressively push volumes in this segment as it attempts to boost its earnings to sustain the current valuations for the stock.

This is, of course, apart from any other new product launches that the company may come up with in the new dispensation. The passenger car market, thus, looks set to enjoy an impressive supply-driven growth this year.

The host of freebies on offer, the easy availability of finance schemes and the low interest rates that make the EMI affordable could well combine with the aggression of the various players to make this year a good one for the passenger car industry.

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