As car sales veer off track, a clamour for policy pitstop

Passenger vehicle sales grew by a modest 6.8 per cent in the first 10 months of this financial year. But that’s only one part of the story. Probe deeper and a new set of numbers come to light. Take utility vehicles out and you can see car sales actually fell 1.8 per cent in the April-January period.

The drop in sales numbers was due to a combination of factors such as surging fuel prices and high interest rates.

Last month, passenger car sales plummeted 12 per cent to 173,420 units. But what sparked questions about the health of the domestic automobile industry is Society of Indian Automobile Manufacturers’ warning that car sales would veer into negative territory in FY13, for the first time in a decade.

The last time car sales dropped in a similar fashion was 2002-03, when sales showed a 2.1 per cent decline. Even during the 2008-09 slowdown, passenger car sales had managed to steer clear of the red zone and recorded a marginal growth of 1.4 per cent. (PALL OVER MOTOWN)

Senior executives of leading automobile companies concede there are challenges ahead. Rakesh Srivastava, vice-president (sales & marketing), Hyundai Motor India Limited, said, “With the prevailing macroeconomic conditions, it would be a big challenge to grow in volumes in the coming year. We hope positive initiatives would be taken by the government to support growth of the automobile industry. Some of the initiatives could be rationalisation of taxes by introducing GST (goods and services tax), reduction in excise duties and consistency in fuel pricing. Lowering of interest rates would help in reducing the acquisition costs, thus bringing additional buyers.”

But, so far, the notional cuts in interest rates have done little to lift consumer sentiment and induce buoyancy in the market. In the coming financial year, the industry is expected to grow in modest single-digits, in line with growth targets of six-seven per cent announced by market leader Maruti Suzuki India Limited (MSIL).

Mayank Pareek, chief operating officer (marketing & sales), MSIL, said, “Last year (2011), the auto industry grew at a compound annual growth rate of 13-14 per cent. In 2012, the growth rate dropped to six-eight per cent, and 2013 is not likely to be different. If in three out of five years we register moderate growth, we cannot meet the original estimate of selling 4.5-5.5 million vehicles by 2015.” The demand cycle in the domestic market also impacted other segments of the industry.

The huge dip in heavy trucks and buses brought down the total sales of commercial vehicles 10 per cent, with 63,218 vehicles sold in January 2013, compared with 69,865 vehicles in the year-ago period.

Sales of two-wheelers also grew by around eight per cent, mostly propelled by demand for scooters in urban areas.

“Usually, the commercial vehicles segment is an indicator of the health of the economy and the numbers in the segment clearly show something is wrong in the economy. Unless the fundamentals change and economic growth takes off, there won’t be any substantial improvement in auto sales. I do not see much improvement in the next six months,” said Sugato Sen, deputy director general, Siam.

The industry body has asked for special schemes under JNNURM (Jawaharlal Nehru National Urban Renewal Mission), as was done in 2008-09 to support state transport undertakings to purchase new buses for fleet upgradation to boost commercial vehicle sales.