Despite a slew of launches and unveilings and keen interest from visitors at the 11th Auto Expo, car-makers do not expect the market to revive in the next three four months, though they are hopeful of a better 2012 in the second half.
According to most industry players, factors like high interest rates, rising fuel prices and input cost pressures that resulted in higher prices of vehicles have resulted in low demand and the situation requires government intervention.
"It is a tough quarter. We expect the market conditions will improve in the second half of this year. The government intervention is needed to create a positive vibe... Besides, softening of the interest rates could help the segment," Hyundai Motor India (HMIL) Director (Sales and Marketing) Arvind Saxena said.
Echoing this view, General Motors India Vice-President (Corporate Affairs) P Balendran said: "The market continues to be sluggish because of factors like high inflation and rising interest rates. We do expect the situation to improve, but not before the next 3-4 months."
He said General Motors, however, expects to grow in double digits this year.
Even Hero MotoCorp, which makes two-wheelers, expects similar growth.
"2012 may not be as good as 2011, but we will still see a double-digit growth," Hero MotoCorp Managing Director and Chief Executive Officer Pawan Munjal said.
Growth of the industry was hit in 2011 due to continuous hikes in interest rates. The rates were raised seven times by the Reserve Bank during 2011, adding to the woes of the industry.
Taking an optimistic view, Mahindra & Mahindra President (Automotive and Farm Equipment Sector) Pawan Goenka said: "For the second half of 2012, many of us are optimistic that the interest rates will come down with the RBI indicating softening of monetary stance. Hopefully, the forex situation will also improve and commodity prices will come down. So we expect about 10 pc growth in the second half of this year."
In 2011, car sales growth fell to a single digit and even went into negative territory for a couple of months as demand took a hit. The trend was in sharp contrast to the near 30% growth witnessed in 2010-11.
The Reserve Bank has adopted a tight monetary stance since March, 2010, and hiked interest rates 13 times to tame inflation. The 375 basis points hike in interest rates since March, 2010, has impacted the country's manufacturing sector as the factory output measures on the Index of Industrial Production (IIP) declined by 5.1% in October, the lowest in about two years.
Amid a slowdown in economic activities, the RBI did not hike interest rates in its December monetary policy. RBI Governor D Subbarao recently said there may be a reversal in the central bank's monetary policy stance and interest rates could start easing in the coming days.
Besides high interest rates, which make borrowing costlier, the industry has been impacted by domestic inflation and the high price of commodities.
Industry experts expect commodity prices in the global market may ease due to the demand slowdown in Europe and sluggish growth in the US.
