Market expanding but higher interest rates, fuel prices showing effect, says auto makers forum.
With higher interest rates and rising fuel prices moderating vehicle sales, the Society of Indian Automobile Manufacturers (Siam) today lowered its sales growth forecast for the sector in the current financial year to 11-13 per cent, from the earlier projection of 12-15 per cent.
The biggest revision is in passenger vehicles (PV), where sales growth moderated 8.8 per cent to 601,547 units in the first three months of 2011-12, as compared to 29 per cent growth over the same period of 2010-11. Siam’s revised forecast says PV sales are now likely to grow at 10-12 per cent, as against the 16-18 per cent projected in April for this year.
Pawan Goenka, president, Siam, said: “The increase in interest rates has been higher than what we had thought three months earlier. Fuel price rise is more than we had anticipated. This has resulted in consumers postponing purchases.”
Interestingly, despite the slowing sales, Siam data reveals India continued to be fastest growing PV market in the world in the January-May period. The Indian PV industry grew 18.2 per cent in the first five months of the calendar year, overtaking the US, which grew at 14.4 per cent.In commercial vehicles (CV), Germany was the fastest growing country, with sales rising 28.2 per cent year-on-year, followed by Britain, Brazil and the US, with sales growth of 26.3 per cent, 18.7 per cent and 13.7 per cent, respectively.
India is fifth, registering growth of 12.7 per cent in the segment over the corresponding period last year.
Goenka cautioned that any further increase in interest rates would drag down growth numbers further.
"We are sitting at a threshold where if interest rates go up further, it will have a devastating impact on the industry. The three biggest concerns for the industry are lower general sentiment due to lower GDP forecast and various scams, higher finance rates and increasing fuel prices.”
Interest rates have gone up by three percentage points in the past 15 months, affecting sales in a market where 70 per cent of vehicles are purchased by availing financing solutions.
Siam said growth projection for the two-wheeler segment is unchanged at 12-14 per cent, while that of three-wheelers has been lowered to eight to 10 per cent from the earlier nine to 11 per cent.
The CV segment is likely to witness 12-14 per cent growth, than the earlier projection of 14-16 per cent.With expectations of a good monsoon season and arrival of the festive season, Siam expects PV sales to pick up again at the end of this quarter.
Vishnu Mathur, director general, informed: “Automobile sales are traditionally slow during July and August. Since commodity prices have softened in recent months, it is unlikely that manufacturers will raise the prices of their products. Sales should pick up by the end of September.”Developments
There were 13 new PV launches in the two-wheeler segment between April and June. Additionally, the industry saw the introduction of three refreshed PV variants and three upgraded versions of two-wheelers in the period.
Domestic PV car sales saw its slowest growth in 27 months in June, at 1.62 per cent, mainly due to rises in lending rates and production loss due to the 13-day strike at Maruti Suzuki's Manesar unit.
Car sales were 143,370 units in June, against 141,086 units in the same month last year.
In March 2009, passenger car sales had slowed to 1.16 per cent."Maruti is the market leader in the car segment. The production loss due to the major strike at its plant affected the entire industry's performance. Tata Motors' sales were also down," Goenka said.
MSIL had lost 12,600 units due to a strike at its Manesar unit last month and it posted a 3.8 per cent decline in domestic car sales, at 70,020 units. Rival Hyundai Motor India's sales grew 11.1 per cent to 30,402 units.
Tata Motors saw a decline of 19.4 per cent in PV sales to 26,184 units during the month.Motorcycle sales in the country grew 15 per cent during the month, to 825,323 units from 717,859 units in the corresponding month last year. Total two-wheeler sales increased 14.6 per cent to 10,71,425 units last month from 934,975 units in June 2010.
CV sales grew 17.8 per cent to 62,009 units in June from 52,627 units in the year-ago period, Siam said. Total sales of vehicles across categories registered 12.8 per cent growth to 13,62,984 units in June, as against 12,07,934 units in the same month last year.
