India's car sales to accelerate by 9.1% by end 2019

The results of the elections and consequent economic reforms are helping the market recover.

Although recent turmoil caused forecasts to be adjusted for new vehicle sales and vehicle production, India’s new vehicle sales market is still projected to grow by 9.15% by year-end, according to a report by Fitch Solutions, adding that vehicle production could expand by 10.5% over the same period.

Fitch Solutions anticipates reforms supporting the automotive sector with the recent election results favoring the National Democratic Alliance (NDA).

“The re-election of Prime Minister Narendra Modi’s BJP-led NDA is the most positive outcome for India from an investment perspective as it implies broad policy continuity and further economic reforms over the next five years which will provide a stable operating environment for automakers to continue with their respective strategies,” the report noted.

Meanwhile, Modi’s yet-to-be-discussed “100-day plan” is expected to include labour and more business-friendly laws to accelerate hiring. Fitch believes that this will strengthen private consumption over the next quarters.

India’s inflation is expected to remain weak at an average of 3.8% in 2019, which the report said is insufficient to drive the market to a contraction.

Stronger private and government consumption are also expected, with respective growth rates of 8.5% and 9.5% in FY2019/20, up from 8.1% and 9.2% in FY2018/19. Likewise, the report forecasts passenger vehicles sales to expand by 5.6% and for motorcycle sales to increase by 9.2%.