SIAM predicts accelerated growth in '10

But vehicle manufacturers see little room for such optimism.

Automobile manufacturers have questioned the projections by the Society of Indian Automobile Manufacturers (SIAM) that the industry will be back on the fast track this fiscal after a poor 2008-09.

SIAM’s 2009-10 projections are based on the anticipated demand owing to about five small-car launches. “Also, the upcoming repossession guidelines from the Reserve Bank of India and falling interest rates will greatly help achieve these projected numbers,” said SIAM Director-General Dilip Chenoy. The repossession norms will make it easier for banks to recover vehicles from loan defaulters.

Car makers disagree. “Frankly, at this moment, it is impossible to project sales growth for the entire financial year,” said Arvind Saxena, senior vice-president, sales and marketing, Hyundai India Motors, the country’s second-largest car maker. “We would be happy if we maintain the same volume in the April-to-June quarter as we did in the same period last year,” he added.
 

TOP GEAR? (SIAM’s growth projections for 2009-10)
Category	2008-09**	2009-10*
	(in %)
Passenger vehicles	0.13	3-5
Commercial vehicles	-21.69	7-10
Three wheelers	-4.13	5-8
Two wheelers	2.60	0-5
* projections;   ** actuals

General Motors Vice-President P Balendran had a similar view. “If the current trend continues, we expect flat or negative growth for 2009-10.”

Pawan Goenka, president of Mahindra & Mahindra’s automotive division, said, “SIAM’s estimates are a consensus view of manufacturers and its research group. Given the uncertainties, it is possible that the growth projections will not be met if there are significant changes in the economic scenario — like increase in commodity prices, sharp swings in excise duty, and so on.”

Japanese car maker Honda Siel, however, agreed with SIAM. Jnaneswar Sen, senior general manager, marketing, said, “Given the economic growth for 2009-10, plus the low penetration of cars in the country, we expect car sales to grow despite the negative factors.”

Chenoy said the growth of commercial vehicles would be possible following the extension of the 50 per cent depreciation benefit given to truck owners from March to June. Second, increased infrastructure spending will result in higher demand. Third, the growth of light commercial vehicles like the Tata Ace despite the economic slowdown is expected to continue in 2009-10.

But R Seshasayee, managing director of Ashok Leyland, India’s second-largest commercial vehicle maker, said, “We are in uncertain times and any forecast for the industry has to be based on assumptions.”

He said the key factors for faster growth would be emission norms for commercial vehicles, enforceable in 2011, that would encourage manufacturers to sell vehicles based on older technology more aggressively in 2009-10. Sales will also look up if sentiments improved after the elections and the monsoons are good.

Equity analysts, however, broadly endorse SIAM. Said Vaishali Jajoo, analyst in Angel Broking: “The growth projections for two-wheeler and passenger care are in line with our forecast of 5-6 per cent. We are less optimistic about commercial vehicles, where growth will be around 4 per cent.”