FY13 car sales in slow lane, lowest in a decade

Sales fall 6.7% to 1,895,471 units as compared to 2,031,306 units sold in FY12; industry expects recovery in FY14, especially in second half

Passenger car sales in the home market declined in 2012-13 for the first time in a decade. Sluggish economic growth, high financing costs and rising fuel prices kept customers from showrooms.

In FY13, which ended on March 31, car sales in India fell 6.7 per cent to 1,895,471 units, as compared to 2,031,306 units sold in FY12. Sales in the segment had earlier declined in 2002-03, by 2.1 per cent. This is the sharpest drop recorded since 2000-01, when passenger car sales fell 7.7 per cent.

S Sandilya, president, Society of Indian Automobile Manufacturers (Siam), said: “Overall sentiment continues to remain weak. Economic growth is not very encouraging, inflation is still not under control and fuel prices have increased significantly.” (Click for table)

Overall, however, passenger vehicle (PV) sales went up marginally by 2.15 per cent to 2,686,429 units, buoyed by the demand for diesel-driven utility vehicles.

With the government flagging off a slew of policy initiatives to revive demand in the domestic economy, Siam expects the market to revive moderately in 2013-14. Passenger car sales are expected to increase threee to five per cent and PV sales by five to seven per cent. Vehicle sales across categories are expected to grow six to eight per cent.

“There are concerns and uncertainties for the future but also hope. In recent times, we have seen some positive policy decisions from the government. Macro-economic recovery is also expected,” said Sandilya. The economy is expected to grow by 6.1-6.7 per cent this financial year as against the five per cent of last year.

Sales of commercial vehicles, considered a barometer of economic growth, are expected to rise by seven to nine per cent this financial year, driven by demand for light commercial vehicles (CVs). While sales of medium and heavy CVs are expected to remain muted in the first half, recovery is expected thereafter. In FY13, sales of heavy buses and trucks fell 23 per cent to 268,263 vehicles, the data showed.

Two-wheeler sales are expected to increase by six to eight per cent in the year, after growing 2.9 per cent to 13.8 million units the previous period. While scooters are expected to continue to register robust demand, sales of motorcycles would depend on improvement of sentiment in rural areas, said Siam.

Rakesh Batra, national leader (automotive practice), Ernst & Young, said, “As we move into 2013-14, PV sales are likely to decline over the next few months. However, we expect interest rates to come down during the second half of FY14 and improved economic growth will result in vehicle sales picking up momentum…the bottom line of automakers and component suppliers is likely to be under pressure, as they not only bear the burden of higher input costs but also offer heavy discounts, innovative financing and buy-back schemes to drive sales.”

In March, passenger car sales fell 22.5 per cent to 180,675 units. Sales of motorcycles fell 8.3 per cent. Sales of utility vehicles, however, soared 34 per cent to 53,866 units.