Indian automobile market fastest growing among top 10 globally (2024)

India has been the fastest growing among the world's 10 largest automobile markets this calendar year when compared to the pre-pandemic year of 2019, according to a global sales forecasting firm.

The world's largest light vehicle (includes cars and light utility vehicles less than 6 tonnes) market, behind China and the US, is estimated to advance 36% in 2023 to 4.8 million units over 2019, according to S&P Global Mobility forecast. While China is expected to close the year with a 2% increase over 2019, the US is expected to report a decline of 9%. The remaining seven markets are likely to post single to double digit declines in 2023 over 2019. While Japan, the fourth largest by volume, is likely to record a 7% drop, Germany, the UK and Brazil may end 2023 with declines of 21%, 17% and 19%, respectively, over 2019.

"Auto sales are still recovering globally in most markets due to a chain of unforeseen events. It all started with the pandemic in 2020, followed by the chip crisis and then the Ukraine-Russia war which only worsened the supply chain," Henner Lehne, vice president - vehicle and powertrain group, at S&P Global Mobility told ET. All these factors plus the transition to electric has increased production cost, he said, adding that "while everyone is growing, they aren't outgrowing the pre-Covid year. India is in a fortunate position, it bounced back quickly and has been on track ever since".

Led by positive macro-economic factors, passenger vehicle sales in India have been advancing month-on-month since FY22. Fuelled by the festive season, November dispatches touched a new high of 334,000 units. In FY23, sales touched a record high of 3.8 million units, surpassing the pre-Covid peak of 3.3 million units seen in FY19. Demand momentum is expected to continue but at a slower growth rate in FY24 due to the higher base of FY23.

The automotive industry had lowered orders for semiconductor chips during 2020 and when the market started reviving in 2021 with the easing of the pandemic, demand for chips exploded causing a severe scarcity. Meanwhile, demand from the secondary industries like electronics, consumer appliances led to an imbalance while the strong demand also led to capacity allocation problems.

"India had an advantage as the content of chips in India manufactured vehicles were lower as compared to US and Europe," said Lehne. A well-integrated supply chain which made the country self-reliant for critical parts also helped.

The 2023 trend is likely to continue in 2024 and China and India are expected to be the only growth markets. S&P Global forecasts global auto sales to touch 88-88.5 million next year. It estimates the current calendar year to end with 86 million units globally. "This is problematic as the production will be close to 89 million units and as a result, we do see some correction in sales next year. There's geopolitical tension and general pessimism everywhere. Therefore, it's a difficult environment to navigate for consumers and not the right time to buy a car."