Kia SyrosSouth Korean carmaker Kia expects to post strong double-digit growth in sales in India in calendar 2025, rebounding from a lacklustre 2024 when an extended general election, adverse weather conditions and tepid consumer sentiment weighed on industry sales. Speaking to ET, Gwanggu Lee, managing director at Kia India on Thursday said the domestic car market will also expand in the coming year backed by improved economic growth and new model launches by automakers.
He said car sales are closely intertwined with a country's economic performance. "I have to say this, even the 6.6% (India's GDP growth projected for FY26) or 5.4% (GDP growth recorded in Q2 FY25) is not low. It's still one of the faster (growing) countries...The expectation is too high. It's (GDP growth) good enough. So based on that, and then on how fast (the economy grows), new buyers will join the car industry."
The comments from the top Kia executive come amid concerns that car sales in India, after posting runaway growth after the pandemic, is slowing down due to sluggish economic activity. The Indian economy expanded by 5.4% in the fiscal second quarter but is expected to rebound to 6.5% and 7% in Q3 and Q4, respectively, as per India Ratings, which expects GDP to grow by 6.6% in FY26.
Kia India, which introduced two new models- Carnival and EV9 at the upper end of the market-expects its sales to remain flat in 2024 at around 255,000 units. But Lee is optimistic that the introduction of the Syros model in the fast-growing compact SUV segment will propel total sales by nearly 18% to around 300,000 vehicles next year. Sales of compact SUVs or those measuring below 4 metres grew by 17% in the first 11 months of this calendar year.
Mid-term, Lee said the Indian car market's growth would also hinge on how fast the middle-class population expands. "But from now on, how fast (the market grows will depend on) how fast they (new customers) are joining this kind of industry. This is key," he said.
After the pandemic, the sharp rise in car sales was fuelled by robust demand for vehicles beyond the mass-market, affordable models. The share of cars priced over INR 10 lakh in overall sales rose to 47% last year, from about 15% in FY19.
"Because of the very unique character of the Indian economy, every household has multiple car owners. In other countries, for example, in Korea, each household has one car, probably two. But here you know, in terms of customer profiles, additional buyers account for almost half of our customers," he said, highlighting that the current crop of buyers prefer bigger, feature-rich SUVs, which now make up nearly 54% of all passenger vehicles sold in the country.
While Lee said Kia India will continue to grow its footprint in the SUV segment, competition too has intensified with all automakers developing products to ride in on the wave. "Some years ago, India was dominated by passenger cars, but now buyers mostly look for SUVs. The middle class, when they look for the first car, they are looking now for a SUV. Even the small, compact SUV, has big potential," Lee said.
The compact and mid-SUV segment, along with MPVs (multipurpose vehicles), is currently at about 1.8 million units per year.
Kia India is aiming to increase its market share to 20% in 2025 from the current 15%, said Hardeep Singh Brar, senior vice-president, sales and marketing.
Separately, Lee said while the government has put in place policies to encourage the transition to electric vehicles, any upward revision in GST rates applicable on EVs is likely to impact consumer adoption. "A big burden for EVs is still the high price. So without any tax incentive from the government, it is very difficult," he said when asked about the impact on possible increase in tax on EVs.
