A Morgan Stanley investment research Asia-Pacific report has said that the domestic auto industry is at a point of inflection. The study has been made in its latest report on the automobile industry dated October 15, 1996.
The report says historical trends suggest that for commercial vehicle (CV) sales to increase, manufacturing output has to achieve a certain volume threshold.
While growth in manufacturing output has declined since February 1996, it is still above the five per cent threshold.
We believe this growth must pick up if sales are to recover substantially, the report said. A delay in the Union Budget announcement, higher-than-usual sales in the monsoon months last year, and tighter credit earlier this year could all have been cause of the recent slowdown in sales growth.
However, the report continues, it is difficult to ignore the drop in manufacturing output growth to single digits (9.1 per cent) in June 1996, the lowest level reached since May 1994.
Finance companies have indicated that an interest rate cut could be triggered if the banks cut prime lending rates by as little as 50 basis points.
This would have an effect on commercial vehicle sales which have been adversely affected (particularly sales of light commercial vehicles) in part by declining profitability.
