Passenger car sales lowest in a decade, recovery expected in FY14

Passenger car sales in the domestic market declined for the first time in a decade as sluggish economic growth, high financing costs and rising fuel prices kept away customers from showrooms.

Last fiscal, car sales in India had fallen by 6.69% to 1,895,471 units as compared to 2,031,306 units sold in the previous fiscal. Sales in the segment had earlier declined by 2.09% in 2002-03.

S Sandilya, president, 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.”This is the sharpest drop recorded since 2000-01 when passenger car sales had fallen by 7.73%.

Overall, passenger vehicle sales went up marginally by 2.15% 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, industry body Society of Indian Automobile Manufacturers (SIAM) expects the market to revive moderately in the current financial year. Passenger cars sales are expected to post an increase of 3-5% in 2013-14, while passenger vehicle sales are projected to increase by 5-7%. Vehicle sales across categories are expected to grow by 6-8%.

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

Sales of commercial vehicles- considered a barometer of economic growth - are expected to increase by 7-9% this fiscal driven by demand for light commercial vehicles. While sales of medium and heavy commercial vehicles are expected to remain muted in the first half of the fiscal, recovery is expected to set in thereafter. Last fiscal, sales of heavy buses and trucks fell 23% to 268,263 vehicles, the data showed.

Two-wheeler sales are expected to increase between 6 and 8 percent in the year, after growing by 2.9 percent 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 sentiments in rural areas, SIAM said.

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 the 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 while passenger car sales fell 22.5% to 180,675 units. Sales of motorcycle fell 8.3%. Sales of utility vehicles, however, soared by 34% to 53,866 units.