So said LMC Automotive after light vehicle sales declined 7% year on year (YoY) in January to 251k while passenger vehicle volume decreased 8% YoY to 207k, while light commercial vehicle sales (up to GVW 6 tonnes) were down 1% YoY at 44k.

According to the firm, on a seasonally adjusted annualized rate basis (SAAR), sales were at 2.76 million units in January, down from 2.82 million units in December and 2.84 million units in November. The January SAAR was also the lowest in more than two years, or since October 2011.

While the negative macroeconomic factors will continue to impact volume over the course of this year, the industry has received temporary reprieve in the form of excise tax reduction from the government.

‘Immediately, OEMs have passed on the duty benefits to buyers and reduced prices across models. We are, therefore, likely to see a temporary surge in volume in the next few months as buyers take advantage of the lower prices,’ said Ammar Master, senior market analyst for India at LMC Automotive.

The firm adds that new models/variants announced at the recent Delhi Auto Expo will also help drive volume in the coming months.

As a result, LMC says it remains cautiously optimistic for light vehicle sales to grow by 6% YoY to 3.11 million units this year. Passenger vehicle volume is expected to gain 7% YoY, mostly on the back of newer models. Growth is projected in the sub‐compact car, compact car, luxury car, SUV and MPV segments.

Meanwhile, demand for light commercial vehicles is expected rise by 4% YoY in 2014, partly bolstered by election spending.

LMCA says its medium and long‐term outlook also remains unchanged. It estimates sales to expand at a CAGR of 15% between 2015 and 2021, when India’s light vehicle market is projected to reach a size of 8.75 million units.