BMI View : As Indian auto sales for the current FY2012/13 stagnate, passenger vehicle sales in the state of Tamil Nadu have grown 6.75% over the April to November 2012 period, clearly outperforming the national average of 0.379%. We believe Tamil Nadu's GDP per-capita being in the top 10 among all Indian states and territories, together with its rural/sub-urban demand is driving sales. Going forward, we expect automakers to increasingly target the rural segment of India as the country expands its current low base of vehicle ownership.
While Indian auto sales have seen a lacklustre FY2012/13 (April 2012-March 2013), due to tight consumer credit, low corporate sector confidence and poor economic sentiment generally, the state of Tamil Nadu has bucked the national trend and been a clear outperformer.
New vehicle registrations across all the Tamil Nadu regional transport offices show that dealers sold 109,603 new passenger vehicles (cars, vans and utility vehicles) from April to November 2012, an average of 13,700 a month. This was a strong 6.75% year-on-year (y-o-y) increase from the monthly sales average of 12,834 units in the same period of the previous financial year. According to the Times of India, Indian passenger vehicle sales for 8MFY12 came in at 1,752,000 units, a monthly average of 219,000 units. This was just a marginal growth of 0.379% y-o-y, over the previous period's monthly average of 218,173 units.
It is no surprise to BMI that passenger vehicle sales have remained resilient in Tamil Nadu. We believe the state's economic growth, as well as its booming lower-tier cities, have helped to bolster national auto sales. Tamil Nadu's FY2011/12 GDP per-capita of INR84,496 (US$1,590) is in the top 10 among all Indian states and territories (see chart below) while the state is also home to manufacturing plants of automakers, such as BMW and Nissan. Furthermore, in a Cato Institute study published in 2011, Tamil Nadu is the top-ranked state in terms of overall economic freedom ratings.
|FY2011/12- GDP Per Capita Of Top 10 Indian States And Territories (INR)|
BMI believes that rural/sub-urban demand from India's tier II cities will continue to increase and provide opportunities for automakers. While Chennai, the capital of Tamil Nadu, accounts for 35% of total passenger vehicle sales in the state, its tier II cities such as Coimbatore and Trichy have seen strong rural demand, which has also been driving the state's auto sales. Nationally, India's rural consumption in value terms has grown 17.2% per annum over the FY2008/09-FY2010/11 period, outstripping urban growth. Given that 70% of India's population still lives in rural areas, we expect automakers to increasingly target this segment as the country increases its current low base of vehicle ownership.