India overtakes Japan to take third spot among largest vehicle markets

India has overtaken Japan to become the third largest vehicle market in 2022 after China and the US, selling more than 4.25 million vehicles riding on pent- up demand and enhanced production by carmakers.

According to the Society of Indian Automotive Manufacturers (SIAM), 4.13 million vehicles — including passenger and commercial — were sold in the country between January and November 2022. SIAM releases quarterly data on commercial vehicles, and thus numbers for the October-December quarter are awaited for the segment. Also, original equipment makers (OEMs) like Tata Motors (TML) have shifted to quarterly reporting of both wholesale and retail sales numbers. So Tata Motors data is awaited.

However, as the country’s largest passenger car player, Maruti Suzuki India, has reported its December domestic sales figures (113,535 units, excluding sales to other OEMs), the overall sales in India have crossed the 4.25-million mark.

According to preliminary data reported by Nikkei Asia, Japan sold 4.2 million vehicles in 2022, down 5.6 per cent year-on-year (YoY).

Data from automotive websites showed that China has posted a 1.7 per cent rise in vehicle sales in 2022 to 26.75 million units, while the US recorded 7.8 per cent YoY decline to 13.89 million. In 2021, China was the leader in the global market, selling 26.27 million vehicles, followed by the US with 15.4 million, and Japan (4.44 million).

With the addition of TML’s quarterly numbers and the commercial vehicle sales figures, India’s margin over Japan is only likely to grow further.

Nikkei Asia reported that Japan’s auto sales had peaked in 1990 at 7.7 million units, but the country’s declining population offers little hope for growth. It reported that China surged past Japan to become the second-largest auto market in 2006. In 2009, China overtook the US to become number one.

Anand Mahindra, chairman of Mahindra Group, tweeted on Monday: “When I went to business school in the 80s, the world was obsessed with the rise of Japan in the auto world. If I had told my international classmates that India would one day surpass Japan in terms of output (yes, much to still learn in quality) I would have been laughed at.”

In 2018, roughly 4.4 million vehicles were sold in India, but the volume dipped in 2019 (4 million). After Covid-19 struck, the numbers plummeted below 3 million units in 2020. In 2021, however, sales recovered and touched the 4-million mark.

Shortage of automotive semiconductor chips dragged production volumes during 2021 and the initial months of 2022. This also created pent-up demand and long waitlists for cars, turning 2022 into a particularly good year.

Observers feel there is plenty of headroom for growth of vehicle sales in India as the country’s population is soon expected to outstrip China and vehicle ownership penetration is still low at 8.5 per cent of households.

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