India's new passenger car sales are likely to grow at a compounded 9.5 per cent to cross the 900,000-mark in the year to March 2007 due to rising incomes and cheaper finance, a research report said on Monday.
CRIS INFAC, a research subsidiary of rating agency CRISIL Ltd, said demand in the nearly 600,000-unit a year market would also be boosted by a possible cut in excise duties, a wider menu of models and longer repayment periods.
Taxes and levies make up close to 60 per cent of the cost of a car in India where only four of every 1,000 citizens own cars, compared with 35 in Thailand, 92 in Brazil, 187 in South Korea and 450 in the developed world.
"Reduction in the duty levels will increase sales volumes significantly. It will also make exports of Indian made vehicles more competitive," the report said.
"The development of a vibrant organised used car market is also likely to add stimulus to new car sales."
Industry data shows car sales rose 7.64 per cent year on year in November to 41,410 units after three months of double-digit growth.
The report said growth in sales would be led by the 'B' segment, or compact cars priced between Rs 300,000 and Rs 500,000, which is expected to grow at a compounded 12 per cent due the affordable price tag.
The 'B' segment is likely to grow to 524,000 units in 2006-07 from 293,131 units in the year to March 2002, the report said.
Although the more expensive 'C', 'D' and 'E' segments are likely to go at a faster clip, they will continue to account for a small part of car sales in the coming years, the report said.
There are 11 carmakers in the domestic market, including global players such as General Motors Corp, Ford Motor Co and Maruti Udyog Ltd, the Indian unit of Japan's Suzuki Motor Corp.