Estimating Demand for Passenger Cars : A Model for the Indian Market

Purpose : This study analyzed trends in Indian passenger car sales for the decade 2010–2011 to 2019–2020. These trends were decoded via demand functions estimated using multiple linear regression. This has crucial theoretical and managerial implications.

Methodology : Multiple linear regressions were carried out using SPSS for different segments of the passenger car industry, namely, mini, compact, super compact, mid-size, executive, and premium. While sales of passenger vehicles were the dependent variable, personal disposable income, product price, fuel price, and interest rates were explanatory variables. Secondary data from the Society of Indian Automobile Manufacturers (SIAM), State Bank of India (SBI), Indian Oil Corporation Limited (IOCL), and the Ministry of Statistics and Programme Implementation (MoSPI) were sourced.

Findings : Demand for most types of passenger cars in India has slowed down, except for compact cars. The regressions show that the mini segment is affected by vehicle price and interest rates, and a lower Goods and Services Tax (GST) for small cars could boost sales. In the compact segment, the price remains a significant factor. Interest rates matter most for the super compact segment, while the preference for better category cars or utility vehicles increases with rising income for mid-size and executive segments.

Practical Implications : A demand-side analysis can benefit companies and inform policy decisions to overcome the recent slowdown. The regression model can advance theory and academic research and aid in supply chain management, demand forecasting, and inventory management studies.

Originality : Unlike prior research on the Indian automobile sector, this study bifurcates the heterogeneous market into segments and conducts econometric analyses.