More gloomy news for car sales, adverse factors making buyers defer purchases

A concern for the industry is slowing demand in rural areas has hit the demand for two-wheelers, which had grown 15% last financial year

The Society of Indian Automobile Manufacturers (Siam) today lowered growth projection for automobile sales in the domestic market for the second time in four months, as high fuel prices, interest rates and slowing economic growth continued to make buyers defer vehicle purchases.

Passenger car sales in the domestic market are projected to grow a meagre one-three per cent in this financial year, the slowest the industry has recorded in over three years. S Sandilya, president, Siam, said, “Inflation is not under control, and the cost of vehicle ownership is high. Economic growth is also not encouraging, which is putting pressure on sales in the automobile industry.” Car sales had grown their slowest by 0.2 per cent during the global financial meltdown in 2008-09.

Overall passenger vehicle sales (which includes cars and utility vehicles) are projected to grow 8-10 per cent this financial year (the earlier estimate made in July for the year was 11-13 per cent). Growth is expected to be driven by strong demand for diesel-driven utility vehicles, more economical to run than petrol-powered ones.

Another concern for the industry is slowing demand in rural areas has hit the demand for two-wheelers, which had grown 15 per cent last year. According to the latest projections, two-wheelers are likely to grow five-seven per cent than the earlier estimate of 11-13 per cent. Growth in the auto industry as a whole will moderate to five-seven per cent from the earlier forecast of 11-13 per cent.

The latest set of numbers coming in has raised questions over the industry’s target to achieve a turnover of $145 billion by 2016, as had been outlined in the Automotive Mission Plan (AMP). Sandilya added, “We are likely to miss the AMP target by 20-25 per cent. We have approached the government to extend the programme by 10 years, till 2026.”

The revisions come amid auto sales plunging for the second time, by 9.43 per cent to 1.42 million units last month. The rate of fall is the steepest since December 2008, when sales had declined 18.25 per cent.

While passenger car sales declined 5.4 per cent in September, the motorcycle segment dipped 18.9 per cent. Though market leader Maruti Suzuki managed to grow sales 12.7 per cent to 88,801 units last month, others like Hyundai Motor, Tata Motors, Ford India, General Motors and Toyota Kirloskar reported a drop in wholesale volumes during the month.

In the motorcycle segment, too, Hero MotoCorp’s sales plummeted a whopping 26 per cent to 393,852 units during the month.