The passenger cars market is estimated to be valued at USD 1,728.25 Bn in 2024 and is expected to reach USD 2530.4 Bn by 2031, growing at a compound annual growth rate (CAGR) of 5.6% from 2024 to 2031. The rising demand for personal mobility options and increasing disposable income levels among consumers across the world are driving the passenger cars market.

Market Driver - Increasing Disposable Income Boosting Passenger Car Ownership Globally

As economies across the world continue to improve, average disposable incomes of residents have been rising considerably. This has provided consumers with greater spending power and introduced them to modern luxuries and amenities.

As individuals make more money, their first big-ticket purchase after acquiring housing is often reported to be a passenger car. The prestige and convenience attached to owning a passenger car is rather enticing for those entering the middle and upper-middle income strata. Improved road infrastructure across urban and emerging rural territories has further bolstered connectivity and mobility. Ride-hailing services have also convinced some undecided customers about benefits of personal transportation over public modes.

Simultaneously, global automakers have launched several 'affordable' models targeted at this emerging consumer class. The success of small passenger cars especially in the above mentioned faster growing markets exemplifies the revenue opportunities arising from their rising purchasing power. Industry experts hence recognize growing affluence as a major driver propelling overall vehicle ownership upwards and expanding the addressable, passenger cars market.

Market Driver - Transition to Electric Vehicles Driven by Environmental Concerns and Government Policies

The issue of climate change has grown into one of the most pressing challenges faced by humanity. Governments worldwide have stepped up efforts to transition the sector towards cleaner alternatives. Of these, electric vehicles (EVs) are emerging as the most viable zero-emission solution, especially for personal mobility needs.

Automakers are responding with aggressive EV model launches with many aiming at 50% of their sales being battery-powered by end of this decade. Even oil exporting countries have curiously joined the switch in view of their internal pollution troubles and future-proofing economies.

Rising consumer awareness about air pollution health effects combined with lower fueling costs than petrol is boosting interest among the public as well. Regulatory tailwinds and evolving industry dynamics point towards EVs becoming massively mainstream and propelling passenger cars market volumes significantly higher than fossil fuel dependent levels. Overall, environmental protection imperatives are triggering a massive transition within the passenger cars market.

Market Challenge - Supply Chain Disruptions Affecting Material Availability

The global passenger cars market has been facing significant supply chain challenges due to the ongoing shortage of crucial materials such as semiconductor chips. As passenger car production resumed after the COVID-19 pandemic, suppliers were unable to ramp up shipments at the same pace. This led to shortage of electronic control units and other automotive-grade chips.

Original Equipment Manufacturers in the passenger cars market have been forced to repeatedly halt or curtail production lines due to non-availability of these materials. The situation does not seem to improve in the near future as it will take at least 12-18 months for semiconductor foundries and suppliers to add new capacities. This supply chain bottleneck has hampered automakers' ability to fulfil order backlogs and meet sales targets. It has also negatively impacted profit margins due to increased component prices.

Market Opportunity - Growth in Electric Vehicle Infrastructure Across Emerging Markets

One of the key opportunities for the passenger cars market is the rising focus on developing electric vehicle infrastructure across major emerging economies. Countries like China, India and Brazil have been actively working to bolster public charging networks in order to encourage consumer adoption of EVs. This includes establishing national policies around subsidy programs and setting up fast and ultra-fast charging corridors along highways.

Automakers are seizing this opportunity to accelerate their electric mobility plans in these high growth markets. Local production of affordable EVs is gathering steam with supportive regulations. Governments are also promoting use of EVs in public transportation fleets as well as ride-hailing services.

Rising concerns about urban pollution and carbon emissions are driving more emerging market consumers to consider electric options for private vehicles. With advanced lithium-ion battery technologies bringing down vehicle costs, mainstream uptake of EVs is expected to pick up significantly in developing nations over the next 5 years.

Focus on new technologies: Tesla has focused extensively on electric and autonomous driving technologies to differentiate itself in the market. Other automakers like Toyota, GM, Ford etc. have also significantly increased R&D spending on new powertrain, connectivity, and automated driving tech to launch newer models with advanced features.

Enhance customer experience: Automakers have recognized enhancing customer experience as a critical factor for sustained sales growth. For instance, brands like BMW, Mercedes etc. have focused on luxury, comfort and performance to offer superior ownership experience. Hyundai too has upgraded quality, design and in-showroom experience over the years to appeal to younger buyers beyond just price.

Expand into new markets: To boost sales volumes, companies have tried tapping into emerging markets with high growth potential. For example, automakers like Toyota, GM and Ford have expanded production and dealership footprint in other high potential markets like India, Brazil, Eastern Europe etc. over the past decade for scale.

Insights, By Type: Petrol Offers High Fuel Efficiency and Widespread Availability

The petrol segment accounts for 40.2% share of the passenger cars market in 2024, in terms of type. There are several factors that are driving the growth of petrol cars. Petrol passenger cars offer better fuel efficiency compared to diesel cars, especially in crowded urban areas where frequent starts and stops reduces the mileage benefits of diesel.

Petrol is also more widely available across the country compared to diesel. While major cities have a robust diesel supply infrastructure, availability can become an issue in rural and interior areas. The easy refueling offered by petrol stations practically anywhere makes it a more practical choice for many.

With rising awareness about vehicular emissions, petrol is perceived as a relatively 'cleaner' option. While the CO2 emissions from diesel and petrol passenger cars are at similar levels, particulate matter and NOx emissions of diesel cars are a concern. This 'green' appeal is strengthening petrol's hold in the passenger cars market.

Insights, By Vehicle Type: Compact SUVs: The Ideal Balance of Performance and Practicality

The compact SUV segment has emerged as a popular choice buyers, with 32.8% share of the passenger cars market in 2024. Compact SUVs manage to strike the right balance between a regular hatchback and a full-sized SUV, giving them an edge over other vehicle types.

With overall dimensions only marginally larger than a sedan, compact SUVs are able to provide multiple practical advantages without being too big or bulky. Many compact SUV models now offer premium features and the latest technologies alongside competent engines with ample power. This has boosted their appeal as a 'value for money' choice rather than just another passenger car. The combination of SUV prowess and driving joy has captured the imagination of customers beyond just outdoor adventure-seekers.

Their growing popularity has also driven auto manufacturers to strengthen product offerings in this hotly contested segment. With new launches and regular feature updates, compact SUVs seem positioned firmly as a sweet spot in the overall passenger cars market.

• The increasing demand for SUVs has led manufacturers to expand their SUV lineups, catering to consumer preferences for larger vehicles with more space and versatility.
• Ride-sharing services are influencing the passenger cars market, with companies like Uber and Lyft impacting traditional car ownership models, leading automakers to explore partnerships and new mobility solutions.
• Asia-Pacific dominates the passenger cars market, accounting for over 50% of global sales, driven by high demand in countries like China and India.
• Electric vehicle sales surpassed 3 million units globally in 2023, reflecting a significant shift towards sustainable transportation.

The major players operating in the passenger cars market include Toyota Motor Corporation, Volkswagen AG, Hyundai Motor Group, General Motors Company, Ford Motor Company, Honda Motor Co., Ltd., Nissan Motor Co., Ltd., Stellantis N.V. (merger of Fiat Chrysler Automobiles and PSA Group), BMW Group, and Daimler AG (Mercedes-Benz Group).

• In June 2024, Hyundai Motor Group unveiled its latest electric SUV, the Ioniq 7, featuring advanced safety systems and over-the-air software updates, strengthening its position in the competitive passenger cars market.
• In March 2024, Toyota announced plans to take full control of Primearth EV Energy (PEVE), another battery joint venture with Panasonic. This strategic move aims to enhance Toyota's competitiveness in the passenger cars market as well as EV market by enabling a more flexible response to growing battery demand.
• In January 2023, Tesla sold 66,051 vehicles manufactured at its Shanghai Gigafactory, marking an 18.38% increase from the 55,796 units sold in December 2022. This growth occurred despite the Chinese New Year holiday, which typically affects sales. The January 2023 sales also represented a 10.37% year-over-year increase compared to January 2022, when 59,845 units were sold.
• BYD Auto Co., Ltd. entered the Indian market with the Atto 3 electric SUV in November 2022, pricing it at ₹33.99 lakh (ex-showroom). By March 2023, the company had delivered over 700 units of the Atto 3 in India.
• Mercedes-Benz reported delivering 2,043,900 passenger cars in 2022, a slight decrease of 1% compared to the previous year. Notably, the company more than doubled its battery-electric vehicle (BEV) sales, reaching 117,800 units, marking a 124% increase from 2021.

• By Type
  • Petrol
  • Diesel
  • Hybrid
  • Electric
• By Vehicle Type
  • Compact-SUV
  • Hatchback
  • Sedan
  • SUV