4 years ago, India could do no wrong. The ‘Incredible India’ campaign had captured imaginations around the world, and almost everyone seemed to believe that it was destined to become a major player in any market that it chose.
Analysts were particularly excited about the potential for the auto market, with one major company suggesting:
- Car sales had the potential to grow from 2.6m in 2011 to 4.5m by 2015, and to 6m sales by 2020
- Its Base Case was for sales of 4m by 2015 and 5m by 2020
- Its Conservative Case still saw sales moving past Germany at 3.5m in 2015, and reaching 4m by 2020
This is perhaps a great lesson in the need to keep one’s feet on the ground when forecasting. For as the chart shows, based on newly-published official industry data, there has actually been no growth at all in auto sales since 2011 (green area). They were 2.63m in 2011/12, and were just 2.60m in 2014/5 (India uses April/March for its annual data). They were therefore still below Germany’s 2.9m sales in 2014.
The problem, of course, was that the euphoria of the time ignored the reality of the Indian economy. It is a country where half its population does not have access to a toilet, and where GDP/capita is just $1500.
- Their sales have grown from 13.4m in 2011/12 to 16m in 2014/5
- Their percentage of total auto sales has risen from 77% to 81% over the period
- The share held by cars has actually fallen slightly from 15% to 13%
- Vans/trucks have also slipped from 5% to 3% (blue) and 3-wheelers were stable at 3% (brown)
Today, the same euphoria can be seen in the rush to expand US ethylene production. Everyone “knows” that the US Federal Reserve will be successful in restoring growth. So why should anyone spend time worrying about the reality of the demand outlook given the impact of ageing populations?
In 2011, the success of the Incredible India marketing campaign meant that everyone “knew” that India was going to be one of the key auto markets for the future. So why would they bother listening to people who wanted to discuss boring stuff about toilets and low incomes?