NEW DELHI: A recent ASSOCHAM-Roland Berger joint study has stated that the passenger vehicle market in India is likely to reach a sales figure of about five million units in FY 2023, clocking a compounded annual growth rate (CAGR) 7.7 per cent, from 3.3 million units in FY18.

"Stronger preference for SUVs (sports utility vehicles) and crossover models is expected to continue in future as well leading to a CAGR of 12 per cent in FY18-23," it said. The study titled, ‘Moving towards greener transportation,’ was conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) along with global strategy consulting firm Roland Berger.

The report, however, noted that significant growth potential exists in terms of penetration of four-wheel vehicles in India which is much lower when compared to global economies such as USA and China.

The study also noted that domestic sales of commercial vehicles in India is expected to cross one million units by FY23 from 832,000 units in FY18 thereby clocking a CAGR of 5.6 per cent.

“Implementation of GST will consolidate manufacturing operations resulting in faster turnaround times and an overhaul of the distribution system to a hub-and spoke model,” it said.

The report further said that stricter enforcement of overloading ban, implementation of scrappage policy from April 2020, and GST are all expected to positively impact M&HCV market demand.

Noting that growth is expected in both agricultural as well as construction machinery segment due to increasing mechanization trends, the report said that off-highway machinery domestic sales are likely to reach 870,000 units by 2022 from 749,000 in 2017 thereby clocking a CAGR of about three per cent.

Driven by expectations of normal monsoons, increased minimum support prices (MSP) and farm loan waivers in states such as UP, Punjab, Maharashtra and Karnataka, the ASSOCHAM-Roland Berger study expects agriculture tractor segment is expected to grow at a CAGR of 2.8 per cent in 2017-22.

Terming the government’s intention to move from fossil fuel to clean fuel as a positive step towards positioning India at the forefront of global quest for clean mobility, the report said that the onus is not on the government alone.

"Auto-component suppliers need to swiftly catch up on green technology and business readiness by technology acquisitions, collaborations and capability demonstrations," it suggested adding that they should de-risk their current businesses by pivoting towards future-ready opportunities that ideally leverage their current capabilities.

The report further said that original equipment manufacturers (OEMs) in turn need to keep a nimble powertrain strategy with focus on green and work together as well as with the government to develop capabilities and roadmaps.