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Car sales in India got back in positive territory in 2014 with a 2.46% increase on excise duty reductions brought in by the government to propel the struggling industry.
However, with the excise duty concessions gone, industry body SIAM is expecting a marginal increase of around 1% in this fiscal against an earlier expectation of 4%.
Passenger car sales during the January-December period rose to 18,51,475 units as against 18,06,965 units in 2013, a growth of 2.46%.
This is in contrast to the 9.59% dip in 2013 which was the first time in eleven years that car sales declined in the country.
"Vehicle prices were down for the nine months in the previous calender year due to excise duty reductions. It helped in creating a positive sentiment thus helping growth in sales," Society of Indian Automobile Industry (SIAM) Deputy Director General Sugato Sen told reporters here.
"The industry sold 1.8 million cars in 2014, it is not a very significant growth over 2013 but it is better than a negative growth," he added.
Sen said despite the expiry of excise duty concessions, the industry is expected to grow marginally in the current fiscal.
"We expect a low single digit sales growth of around one% during the financial year. We are not anticipating negative growth this fiscal," Sen said, adding that earlier it was estimated that car sales could grow by around four% in the current fiscal.
Commenting on the motorcycle segment, which posted a growth of 6.21% in sales in 2014, Sen said the sector grew primarily due to relief in excise duty during the year.
Motorcycle sales last year stood at 1,09,13,003 units as against 1,02,75,001 units in 2013.
When asked about the commercial vehicle segment, which saw sales drop by 11.8% to 6,06,232 units in 2014, Sen said the sector did not perform well as "real economic activity is still to gain steam."
Commenting on implications of higher excise duty, Sen said: "There will be some negative impact. Customers have advanced their purchases in December so there could be an impact on sales in January and February."
The excise duty relief created a very positive sentiment, which helped the industry, but now that it has been withdrawn, it remains to be seen how much impact it would have, Sen said.
He added that a cut in interest rates might help the industry recover from the impact of increased prices.
"The most vulnerable segment is small cars. It is the most sensitive segment as far as pricing is concerned. It is going to be the first one to be hit due to expiry of excise duty relief," Sen added.
