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Car sales to grow 9.5%, says study
- car-nival: on the trail of the coolest sedan zipping along the high road to growth

Mumbai, Dec. 23: A Cris Infac report says passenger car sales should grow at a compounded annual growth rate (CAGR) of 9.5 per cent to 9,09,000 units in 2006-07.

This growth will be led by the B segment—that includes the Maruti Zen, Wagon R, Maruti Alto, Hyundai Santro, Tata Indica and Fiat Palio—due to a change in customer preferences towards higher lifestyle cars with affordable price tags.

The premier research agency, a subsidiary of Credit Rating Information Services of India Ltd (Crisil), said key drivers of overall rise in car sales are the increase in disposable incomes, low finance rates with longer repayment tenures, possible lowering of excise duties and a wide choice in terms of models in various segments.

The report added that the B segment is likely to grow at a CAGR of around 12 per cent. This segment, it said, also offers the widest choice in terms of availability of models, hence manufacturers will continue to aggressively launch new models in this segment.

Consequently, the A segment is likely to grow at a marginal rate in the long term with sales being driven by customers from smaller towns. The C, D and E segments, the study said, are likely to grow at a high pace, but will continue to form a small portion of the total sales.

The vibrant organised used car market is also likely to add stimulus to new car sales, the study said. Passenger car sales in the first eight months of 2002-03 have already grown around 9.8 per cent riding on high discounts offered to customers.

While the passenger car market will grow at an impressive pace, sales of utility vehicles are unlikely to remain far behind. This market is projected to grow at a moderate CAGR of around 4-5 per cent till 2006-07, the study said. The report states that the availability of cheap finance will be one of the key drivers of growth, which will enable many utility vehicle owners to replace their existing vehicles.

Another interesting aspect highlighted by the study was that manufacturers would try to change the ownership profile of utility vehicles by increasingly targeting individual owners for the new models being introduced.

Meanwhile, competition in the passenger cars and utility vehicles market is likely to be stiff, with several new models jostling for space in the market, resulting in increased spending by manufacturers on sales promotion. The competition will also prevent companies from fully passing on increases in cost of production, which, in turn, will put a pressure on the margins.

To increase sales volumes, manufacturers are likely to exploit new markets in the semi-urban and rural areas by opening new dealerships.

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