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New Delhi , Sept. 28

THE Indian automotive industry is likely to maintain, over the short to medium term, the growth momentum picked up in 2003, according to ICRA's latest report on the industry.

The report, titled `The Indian Automotive Industry', also said that with India likely to increasingly serve as the sourcing base for global automotive companies, automotive exports are likely to gain increasing importance over the medium term.

It projects the demand for passenger cars (including exports) to increase at the compounded annual growth rate (CAGR) of eight per cent during the 2004-2007 period.

However, the growth rates are likely to vary across segments. Although the mini-car segment is expected to sustain volumes, it is likely to continue losing market share.

On the other hand, growth in the medium term is expected to be led largely by the compact and mid-range segments.

Additionally, in terms of engine capacity, the passenger car market is moving towards cars of higher capacity, the report said.

For the two-wheeler industry, the report expects a CAGR of nine per cent during 2004-2007, with the motorcycles segment achieving a higher estimated CAGR of 11.5 per cent.

This implies an increasing share of motorcycles in incremental two-wheeler sales.

The erstwhile dominant segment of the two-wheeler industry - scooters - is expected to report a marginal growth while the share of mopeds is likely to decline further in the medium term.

According to the report, one of the key developments in the two-wheeler industry is increasing segmentation into various product and positioning platforms.

"This apart, exports present a big opportunity to the Indian two-wheeler manufacturers."

Commercial vehicle sales are expected to increase at a CAGR of 5.2 per cent during 2004-2007.

"The expected recovery in the economy and industrial activity, besides the increased Government emphasis on infrastructure development, augurs well for the industry. While structural factors may drive the demand for commercial vehicles, the continuance of soft interest rates and the easier availability of finance would also support growth."

While the medium and heavy commercial vehicles segment is expected to report a growth rate of 5.5 per cent during 2004-2007, sales of light commercial vehicles (LCVs) are likely to achieve an annualised growth rate of 4.7 per cent.

The demand for multi-axle trucks, which offer better economics in terms of transportation cost, is expected to receive a boost from the National Highways Development Programme (NHDP).

As for tractors, the report said that the decline in tractor sales since the year 2000 has not yet bottomed out, and that sales in the fiscal ending March 2004 would be almost at the same level as the previous year.

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