When the present fiscal year ends in March 2012, automobile manufacturers in India are going to record, at best, a marginal growth in terms of sales. The Indian auto market has been affected in the present year due to an increase in costs as well as higher interest rates. However, according to SIAM, a slash in rates could witness the market rebounding next year.
Rising costs of finance, increasing fuel prices along with continuously increasing manufacturing costs have proved deterrents for consumers in the third largest economy of Asia in the recent quarters. This has impacted the car makers a lot in the Indian auto market, which has been considered as one of the highest growing markets in the automobile market.
The sales of cars are expected to just achieve break even numbers in FY 2011/12 as per SIAM, which has revised for the third time the initial forecast of growth that it had made of 16% to 18%. This, however, depends on whether this recent momentum that sale has received, in the recent days, keeps continuing till March.
Senior Director SIAM, Sugato Sen has said that the auto industry is likely to break even if it performs better in the coming three months. However, if the sales improve extraordinarily, the overall growth could be 2%.
The interest rates have been hiked thirteen times post March 2010 by the Reserve Bank of India. This has significantly affected the increasing consumer segment of middle class, which mainly depends on loans for buying cars. It cannot be denied that it is the middle class segment that has made India the second fastest market for automobile growth, following China.
Sales were down in July after a continuous growth of three years and were the lowest for a decade in the month of October. This happened with consumers, who were planning to buy a car for the first time abandoning or deferring their plans. This had particularly impacted the market for small cars, which is the biggest segment in India.
This financial year has seen car sales come down by 2.3% as on date compared to the same period in the previous financial year.
After a drop for four consecutive markets, the sales figures regained momentum in December with a growth of 8.5% over the same period last year. SIAM has said that if the RBI starts easing its interest rates soon, the growth trend is going to continue in the upcoming fiscal year.
Speaking to the media, SIAM President, S. Sandilya has said that the upcoming financial year will be quite challenging. However, there are indications that RBI is not going to increase the interest rates further. Even, the chances of the rates decreasing exist. If that happens, the auto industry is expected to receive an immediate boost with the growth in consumer demand.
Is the road ahead expected to be smoother?
The sales of cars are expected to grow at a rate of 11% to 13% in the upcoming financial year that is going to end in March 2013. This has been predicted by SIAM, in lines with the total growth forecast of 10% to 12% it has made for the auto industry.
Director General SIAM, Vishnu Mathur has said that the forecast has been made on the basis of increase in demand as well stagnancy in the ownership cost to the figure it is as on date.
In the financial year ending March 2010, the car sales had registered a whooping annual growth of 30%. This factor had influenced a lot of global manufacturers including General Motors and Ford Motors to increase their scale of operations in the Indian auto market with the expectation of achieving growth.
India is now witnessing an increase in the population of youth, fat pay check as well as a boom in the middle class segment. This has made the auto manufacturers to believe that the present slowdown in sales is a temporary factor.
Analysts in the industry believe that if RBI starts the process of easing its rates and the GDP growth of the country is better than the predicted 7%, then the target set by SIAM may be exceeded by the car makers.
December registered sales of 159,325 cars by the Indian auto manufacturers. The total sales registered in 2011 were at 1.95 million cars, the annual growth being 4.2%.
Maruti Suzuki, which is the largest car maker in the Indian auto market, dropped 7% in terms of sales in December. However, its Indian rivals Mahindra as well as Tata Motors registered significant growth of 26% and 22% respectively.
However, Tata Motors have registered a drop of 3% in sales of passenger cars in the present financial year, till date, compared to the previous year.
However, the sales of buses and trucks, which indicates how the economic activity in the country is shaping, has risen by 14.5% in the month of December from the same period in the previous year, by selling 72,192 vehicles, according to SIAM.
Commercial vehicles have registered a growth of 17.5% in the current year by selling a total of 774,874 vehicles. Industry sources expect that the upcoming financial year will register a growth of 12% to 14%.