CAR sales in 2012-13 are set to record their worst performance in the last four years as consumer demand continues to be low on high interest rates, poor macro-economic conditions and high fuel prices.
The Society of Indian Automobile Manufacturers (Siam) on Wednesday slashed the sales growth outlook to 1-3% after the industry — for the second consecutive month — posted one of its worst monthly sales in September. Earlier in July, Siam had projected a more optimistic 9-11%. Similar abysmal growth levels were last seen in 2008-09 when sales grew 1.39%. Sales weren't robust last fiscal either, with growth at 2.35%.
The industry is now pinning hopes on festival season sales. Siam director general Vishnu Mathur said: “Diwali (in November) will help push up car sales, but it will still be subdued compared with other years”. New launches in the next few weeks, such as the Maruti Alto 800 and Chevrolet Sail, may also boost sales.
Though car sales continue to be low with grim prospects, utility vehicles may see a rise of 50-52% owing to strong demand for diesel vehicles. As a result, firms like Mahindra and Toyota Kirloskar will be major beneficiaries while Maruti Suzuki may see good sales of its multi-purpose vehicle, which comes in diesel variants also. Utility vehicle sales have already grown 56% to 2.55 lakh in the first half of the current fiscal.
Siam has reduced by half the growth projection for the overall auto industry during the current fiscal to 5-7%, from the previous target of 11-13% announced in July.
Mathur said that the recent hike in diesel prices has led to a 15-20% increase in freight costs, forcing automakers to increase vehicle prices. Higher prices is deterring customers to make purchases.
“The reforms announced recently will not help directly, but market sentiments are certainly expected to improve. If more jobs and money flow into the economy, people will consume more goods,” he said.
Two-wheeler sales growth projection has also been lowered to 5-7% from the previously-announced 11-13%. Buyers in rural areas are believed to have delayed purchases because of the uncertainty in agricultural output after irregular monsoons. Urban buyers are finding auto loans too expensive.
According to Siam, the worst hit could be the commercial vehicle sector, which may post just a 3-5% growth in FY13.
“General industrial production and mining is down, while we are not yet clear how the farm output will be this year. This is why truckers are not expanding their fleet,” Mathur said.
The industry has sent a list of suggestions to the government to help the ailing sector, which includes incentives for fleet modernisation, re-introducing the JNNURM scheme and re-starting government purchases. Meanwhile, car sales in September dipped 5% over the corresponding month last year, though strong utility vehicle demand helped the over-arching passenger vehicles segment to post a 5% growth during the month. Market leader Maruti Suzuki bounced back after its labour problems with a 13% growth in the month, though rivals Hyundai and Tata Motors posted a 14% and 5% drop, respectively.
Two-wheelers were the worst performing segment with a 13% drop in sales in the month. This has been attributed to a cut back in production on low demand and a piling up of inventories at dealers.
Commercial vehicles sales numbers in September were flat, with the medium and heavy CV sub-segment posting a 15% drop in sales.
