(January 2, 2011) The light-vehicle market in India is poised for continued strong growth during 2011, and is driven by rising income levels, overall economic growth, the launch of multiple new models, and the continued availability of affordable credit, according to Darius Lam, senior market analyst at J.D. Power Asia Pacific.

“We forecast that light-vehicle sales will reach just under 3 million units during 2011, which would represent a growth rate of over 9 percent, compared to the 2.7 million light vehicles expected to be sold in 2010,” he adds.

In the latest issue of J.D. Power India Automotive Monthly — Market Trends, Lam provides a summary of this year’s auto industry performance in India and offers economic and sales projections for 2011 in one of Asia’s fastest-growing automotive markets. Highlights from Lam’s column are excerpted:

The Indian auto market has done exceptionally well during 2010, growing by over 30 percent compared to 2009. The pace with which it bounced back from the slowdown of late 2009 surprised all the players in the industry. In fact, most manufacturers and their suppliers have struggled to meet rising demand by increasing production at their plants.

Without a doubt, the biggest driver of the light-vehicle market is the steady rise in income levels across India, Lam says. Currently, the per capita GDP is estimated at about $1,000 and this is expected to grow rapidly over the next few years, in line with the growth of the country’s economy. This has a direct and positive impact on the demand for passenger cars, utility vehicles and light trucks.

In addition, the rise in GDP and income levels should also boost consumer confidence — and their willingness to spend this added income on buying new vehicles.

Since around 70 percent of light vehicles in India are purchased using credit, another very significant factor that would contribute to the growth of the market. While interest rates have risen gradually during 2010, as the central bank was worried about inflation, the latest signs are that inflation seems to be under control.

As a result, interest rates are already stabilizing and there is a concerted attempt by the central bank to increase liquidity in the system. This would also help spur demand for vehicles, as most Indian vehicle buyers are more than willing to buy vehicles on credit if they can afford the monthly payments.

Toyota Etios, one of
several new models
expected to boost
India's market

Another huge factor that will drive up the market during 2011 is the availability of new models, particularly those launched in the sub-compact segment of the market.

These include models like the just-launched Toyota Etios, which goes on sale beginning in January. This is the company’s first serious attempt at cracking open the Indian market, and early signs indicate that the Etios should do very well in India thanks to its affordable price tag of around US $10,000, or about 496,000 Rupees, and Toyota’s premium image in the country.

Other models that were launched in 2010 in the sub-compact segment, such as the Ford Figo, Nissan Micra and Volkswagen Polo, would also continue to drive up overall market volumes. Never before has the Indian consumer had so many choices in this price range of $8,000 to $12,000 (or about 362,000 to 543,000 Rupees) and consumers are snapping up these new models.

Another important market driver is the rapid development of the Indian road network. The government is currently in the midst of the biggest expansion and improvement of the highway and rural roads network in the history of the country.

"Due to these positive factors, we forecast that the passenger-vehicle segment will grow to 2.36 million units in 2011, from the 2.17 million units that are expected to be sold in 2010. This is a growth of 8.8 percent, which is remarkable given the rapid growth during 2010 itself," Lam said