Mr. Hemal Thakkar, Associate Director at CRISIL Research, on the key trends shaping the Indian Passenger Vehicle Market:
Q 1). India is expected to emerge as the world’s third-largest passenger vehicles market by 2020. Hitting that mark will depend on today’s rapid economic development continuing and supportive regulations and policies. Are we driving on the right track?
Mr. Hemal Thakkar: India is expected to remain one of the fastest growing economies in the next couple of years, with growing per capita income. The last four years have seen structural shifts in the form of demonetisation (formalising the economy) and the Goods and Services Tax (ensuring tax compliance and simplifying the complex indirect tax structure), along with significant regulatory changes, paving the path for fundamentally stronger growth story in years to come. Better ranking in ease of doing business will facilitate more investment, leading to higher employment opportunities and hence income in the hands of individuals. The demographic dividend will play a crucial role, too. Given all these, we are comfortably placed to emerge as the third-largest passenger-vehicle market by 2020.
Q2). What do you think are some of the key regulatory trends that are going to impact the Indian passenger vehicle industry in the near future. What will be their impact on growth?
Mr. Hemal Thakkar: In India, passenger vehicles were, are, and will always be an aspirational buy. There were apprehensions in the industry that vehicle ownership will reduce once the cab aggregator business took off in a big way, leading to significant slowdown in terms of growth. However, we are yet to see such an impact; in fact, this has only helped the industry in the past few years.
That said, the top 5-7 urban markets with high penetration of passenger vehicles will see some slowdown on account of increasing congestion, growing penetration of public transport infrastructure (metro, mono, bus rapid transport, shared mobility, etc). However, the 98 smart cities that the government would invest in will propel growth.
A spate of regulations is expected to impact the industry in the short to medium term, including CAFÉ norms, BSVI norms, and safety regulations, as these would push up the cost of the vehicle and hence the total cost of ownership. However, we are moving in the right direction as safety and environment is something that should not be compromised.
Q 3). Connectivity is still in the early stages of adoption in India. However, connectivity-linked applications are picking up. More advanced telematics features that utilize car sensor data, driving behavior, and vehicle-health parameters are also evolving. What is the way forward for connected cars in India?
Mr. Hemal Thakkar: Yes, connectivity is in early stages of adoption in India. However, the opportunity is huge and adoption is growing fast. We have already seen market leaders enter this space with advanced telematics systems. This will help trace and track, and also act as early warning signal for maintaining your vehicle in a more efficient manner. In the next 3-5 years, we believe connected mobility will gather pace and these features will be available in at least the top-end models of every manufacturer.
Q 4). Although EV is the buzzword in India at the moment, however, sale of electric cars during the last financial year dropped by 40%. Do you see an upswing any time soon?
One or two years is not adequate time to judge the success of electric vehicles or the technology thereof. Though India is currently at a nascent stage with respect to electric vehicles, manufacturers are taking huge strides by entering into joint ventures with respect to battery technology and developing in-house capabilities. The quantum of investment in e-mobility is very high globally, too, and hence we believe the technology will only evolve and develop over the next couple of years. However, with the technology settling and battery technology being available at a reasonable cost, we see very fast adoption of electric vehicles in years to come. We see this gathering momentum once battery prices reach levels of $150-170 per Kwh in the next couple of years compared with $200-220 per kWh now. Also, chemical composition of batteries is getting better over time, leading to better discharge rate.
Q 5 ).Penetration of shared mobility in India remains low compared with China and the United States, but a major shift is under way in densely populated cities where sharing vehicles costs less, comparatively, than driving a personal car. Will consumers choose to give up personal ownership of cars in favour of sharing?
Mr. Hemal Thakkar: As mentioned earlier, in India, passenger vehicles are an aspirational buy and the culture is very different compared with say China or the US. However, we see a definite shift towards shared mobility and increasing penetration thereof in years to come as urban agglomerations are getting highly congested, with limited scope of improving infrastructure. This would lead to people choosing shared mobility for their daily commute. Still, we believe this would have limited impact on personal ownership, at best.
Q 6 ).Lastly, it would be great if you could let us know what excites you to be a part of the upcoming Passenger Vehicle Forum 2018?
Mr. Hemal Thakkar: The industry is undergoing significant changes and the dynamics are changing rapidly. In such a scenario, the forum offers an opportunity to get to know the views of the people in the industry – the inside-out perspective, as it were – and the on-ground developments. That’s the exciting part.