India Ratings and Research (Ind-Ra) expects the automobile export volume growth momentum to continue in FY19, although at a slower pace than in FY18. Automobile exports from India revived in FY18 after showing subdued growth for two years due to weak economies and currencies in African and Latin America (LATAM) countries. With the stabilisation of commodity prices, these regions have witnessed economic stability, inducing demand for two-wheelers in particular. Ind-Ra expects high single-digit growth in the overall exports volume in FY19.
Vehicle exports from India recovered in FY18, post a decline in FY17 and slow growth in FY16. Export volumes of all vehicles combined grew 16.1% y-o-y in FY18, compared to a 4.5% y-o-y fall in FY17. The growth was largely driven by two-wheeler and three-wheeler sales (the largest contributor to export volumes) which grew impressively at 33.6% y-o-y in FY18, driven by stabilisation of developing countries in Africa and LATAM. However, PV exports volume declined 1.7% y-o-y during the same period, as passenger cars volumes declined and UV volumes slowed, post rising significantly in the past five years.
Three-wheeler exports grew 40% yoy in FY18, mainly due to the low base of FY17 when exports had declined by 33% due to factors similar to those for two-wheelers. A recovery was seen largely in 2HFY18. Ind-Ra believes that exports will rise further in FY19, although at a slower pace than in FY18.
A higher demand for the last-mile connectivity in emerging markets of Africa and South-East Asia, due to developing infrastructure and an expected rise in demand for public transport, is likely to fuel three-wheeler exports growth. India exports as much as 38% of three-wheeler production, mainly to Africa and Asia, to meet their last-mile connectivity requirements.