Friday, January 10, 2014
By Kamal Swami
Worst year of decade for auto industry
India's car market ended 2013 as one of its worst years with a 10% fall in sales, the first annual decline in 11 years. With rising fuel prices and sticky inflation, which keeps borrowing costs high, the industry doesn't see any signs of an immediate recovery. Car sales, an indicator of consumer demand and the country's macroeconomic conditions, remained sluggish with 1, 91,692 fewer units sold in 2013 compared with the previous year. According to data from the Society of Indian Automobile Manufacturers (SIAM), India's domestic car sales last year totaled 18, 07,011 units. SIAM expects the somber mood to continue for some more time. "We are witnessing one of the worst times for the industry," Vishnu Mathur, SIAM's director-general, told a news conference on Thursday. "There has been no respite from high inflation, rising fuel price and the unfavorable interest-rate regime that is dampening customer interest in a weak economy." Analysts tracking the industry also echoed similar sentiments.
Any revival or turnaround can only be expected in the second half of 2014, possibly after the outcome of the general elections, they say. "The auto industry continues to face challenges from the high cost of ownership and unfavourable macroeconomic conditions, which have resulted in poor consumer sentiment leading to sluggish demand both for passenger and commercial vehicles," said Amit Kaushik, principal analyst for autos at IHS Automotive, a global consultancy that has expertise on forecasting. "We expect the market to remain weak through the first half of 2014 and don't see any immediate turnaround," he added.
Amid the gloom, the only saving grace was the two-wheelers segment, which posted a 4% expansion in 2013 on the back of strong rural markets and bullish demand for scooters in urban areas. The sales of two-wheeler units, in fact, lifted the overall auto industry sales into the positive territory. The commercial vehicles market continued its downhill journey, with sales falling 26% to 46,757 units in December. The segment has now posted lower sales every month in the past two years. SIAM executives portrayed a weak picture for the trucks and buses market, which is considered a barometer for economic activity. "Commercial vehicles are badly hurt due to lack of mining activities and stalled infrastructure projects. The industry hasn't yet bottomed out and there are no immediate signs of revival," Mathur said.
The industry is pinning its hopes on the biennial Auto Expo that will see 70 new vehicles making debut for Indian customers. Some of these models will be launched immediately. According to SIAM, since April, 22 new car models, 40 new variants and 10 refreshed models were launched, generating consumer excitement. New models like Honda Amaze and Ford EcoSport continue to enjoy strong demand.
Source: Economic Times