NEW DELHI: The demand for affordable small vehicles in India is expected to witness a recovery in 2025; however, the major markets such as the US and Japan are still struggling to meet the demand, stated Nomura in its report.
The global financial services firm, however, lowered its financial year 2025 third quarter estimate for India’s passenger vehicle (PV) industry to 1 percent year on year, which was 4 percent earlier. It maintained its estimate at 6 per cent YoY for FY26/3F.
“As pent-up demand fades away, a tepid new launch pipeline and subdued small car demand have impacted near-term momentum. This is despite the discount push and ad spends by OEMs. We expect a gradual improvement in FY26/3E on a low base”, the report added.
The global financial services firm said that the mix continues to improve as SUVs and premium models drive Average Selling Price (ASP) growth. The share of CNG variants has also witnessed continuous growth in the country, as per the report.
On electric vehicles (EVs), it added that the acceptance of EVs has been modest so far; however, a strong new launch pipeline can drive penetration in FY26/3E. “Rural demand seems to be picking up and should benefit two-wheelers (2Ws), especially given a low base. Hence, we raise our growth estimates to 12 percent y-y for FY25/3E (10 percent y-y earlier) and maintain 10 percent y-y for FY26/3E,” Nomura added.
It further added that after a decent 5 percent volume compound annual growth rate (CAGR) over FY19-24, the PV industry has seen signs of weakness in FY25/3. Weakness in small car demand, normalisation of pent-up demand, and a weak new launch pipeline have impacted volumes.
Lowering the volume growth estimate to 1 per cent for FY25/3E, the firm added that despite the strong discount push by various OEMs, inventory levels remain elevated. Raising its industry growth outlook to 12 per cent for two-wheelers, the firm added that factors such as rural recovery on good crop outlook, a slew of launches in ICE, and affordable models in EV continue to support the demand.
On the global scenario, the global financial services firm added that the Original Equipment Manufacturer (OEMs) globally will witness a loss of pricing power in almost all the markets due to a shortage of supply of new vehicles in the post-pandemic period. As per the report, the markets across the globe are witnessing rising volume, which will erode the greater pricing power enjoyed by the OEMs, as the margins for global OEMs moderate.
The report also highlighted the impact of the US president-elect on the global automobile market, adding that his policies will significantly foster the uncertainty in the markets across the globe.
The job losses in Europe and political turmoil in France and Germany will not only impact the overall demand recovery in Europe but also the pace of its green transition, the report added. The report adds that Trump’s intent to use tariffs as a negotiating tool to push his America-first agenda is a significant near-term overhang for global OEMs.
Tariffs by the US will have negative repercussions for car buyers in terms of higher prices and lower affordability, which will eventually dampen auto demand in the US, the report added.
“For automakers, we see risks of stiffer competition in the US and other markets if OEMs believe that tariffs are here to stay. Lastly, tit-for-tat tariffs by other countries could worsen the situation,” Nomura added. (ANI)