Passenger vehicle sales to grow 7-9% in 2017: Fitch

New Delhi: Passenger vehicle (PV) sales in India is likely to grow in the range of 7-9 per cent next year on the back of low fuel prices and an accommodative monetary policy stance by the Reserve Bank of India, according to global rating firm Fitch.

"We expect PV sales to increase by 7-9 percent, after rising 12.3 per cent year on year in April-September 2016 due to improving consumer confidence, new model launches and the lifting of a ban on the sale of diesel cars in Delhi," the rating firm said in a report.

Besides, the demonetisation of high currency notes would only impact sale of luxury cars in the country, it noted.

"Undeclared income is less often used to buy small cars, and two-wheeler and commercial vehicles, so sales of these are likely to stabilise quickly once the liquidity situation in the economy is restored in the near future," it said.

The report said the rollout of the Goods and Services Tax (GST) in its current form would be largely price neutral because the proposed rates are in line with the existing level of taxes.

According to Fitch, the auto sales in the country would also benefit from strong GDP growth, which the agency forecasts at 6.9 per cent in 2016-17 and 7.7 per cent in 2017-18.

"Furthermore, the government's focus on reviving infrastructure spending and structural reforms such as the GST Bill will boost investments, which will provide strong support to economic growth and consumer spending," it noted.

On the commercial vehicle segment, the rating agency said it expects medium and heavy commercial vehicles (MHCV) sales to improve with progress on stalled infrastructure projects and gradual recovery in mining activity after metal prices bottomed out in 2016.

"We also expect MHCV sales to benefit from buying ahead of an expected increase in prices when new emission standards (BS IV) are implemented from April 1, 2017," it added.

Besides, the light commercial vehicles (LCV) sales are expected to continue its growth with a significant demand boost likely from a timely rollout of GST in April 2017 as planned.

Similarly, Fitch expects sales of two wheelers to continue increasing after posting strong 17.5 percent (yoy) growth in first half of 2016-17 on the back of a rise in public-sector wages and healthy rural spending.

On the other hand, passenger vehicle exports are likely to remain subdued due to macroeconomic weakness in Latin America, it predicted. 
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