After a year of dismal growth auto revs up for 2015 with a slew on new launches

Year 2014, that began with a lot of expectations for the automobile industry is ending on a dismal note. Apart from two-wheelers, most other categories including passenger vehicles and commercial vehicles either declined or grew marginally during the year.

Despite the new government at the centre and some improvements in buyers' sentiments, the industry is yet to come out of the woods. However, as the year ends, the industry is gearing up for a new start with a slew of next generation vehicles expected to rev up optimism and increase sales. Industry experts call it (2015) the year of important launches.

This is evident from the fact that most players, in 2015, would be exploring newer territories by entering new segments. For example, Maruti Suzuki, the biggest car-maker, known for its compact and entry level cars will launch its brand new sports utility vehicle (SUV) next year. The company will also mark its entry into the light commercial vehicle (LCV) next year, where players like Tata Motors and Mahindra & Mahindra (M&M) are already dominant players. Hyundai Motor India, the second biggest car-maker will launch its compact SUV next year, competing with Ford's EcoSport. Companies like Nissan Motor India and Renault India will launch their first multi-purpose vehicle (MPV) – Go Plus under Datsun brand and Lodgy next year. While homegrown automaker – M&M – will look at strengthening its position in the SUV category, by launching compact vehicles, while Tata Motors will launch its small car – Bolt.

According to industry experts, auto companies are already gearing up to enhance their capacities in anticipation of positive market conditions. "There will definitely be better utilisation of existing capacities, however, investments in newer capacities are unlikely to happen next year, "said VG Ramakrishnan, managing director, Frost & Sullivan South Asia.

According to industry players, expected decline in interest rates next year and fall in fuel prices, will drive the growth for the industry. "The major challenge could be, if the government decides not to extend the excise benefits.

It could have a setback on the industry as the prices of the vehicles would go up," said Puneet Gupta, associate director, IHS Automotive Sales Forecasting.

The excise benefits announced by the previous government at the interim budget was extended by the Narendra Modi-led government till December this year, which fuelled the marginal growth in sales in the second half of the year.

The car companies have already announced a price hike from next year onwards owing to higher inputs costs. Hence experts said that the prices of cars will gradually go up from next year onwards, with expected regulations on having mandatory safety gears in all cars.

"The good part is the decline in oil prices, which will help in driving growth of petrol cars and entry level cars, which were hit the hardest," said Gupta. The industry could see a double digit growth next year, say industry watchers.

According to the data released by society of Indian automobile manufacturers (SIAM), sales of passenger vehicles – which include cars, utility vehicles and vans grew by only 2.68% in April-November 2014 over the same period of the previous year.

"This year, the industry grew marginally. Next year could be a growth of 8-10% depending on the policies and macro economic scenario. Fuel prices are on right track, inflation is coming down and it should reflect in interest rates also. Things are moving in right direction," said RS Kalsi, executive director, marketing & sales, Maruti Suzuki.

After a volume decline of almost 50% in the last two years, sales of commercial vehicles (CVs) improved with a single-digit degrowth of 7.27% between April-November this year as compared to same period last year, while medium & heavy commercial vehicles grew by 5.30% and LCVs declined by 12.90%.

"Already the 5-tonne and above segments have seen a growth of 3-4% this year. We expect a double digit growth next year on account of investments in new infrastructure projects, interest rates going down and overall improvement in the economy," said Vinod Aggarwal, CEO, VE Commercial Vehicles.

In the two-wheeler segment, experts said that the demand for premium motorcycles could return in 2015, with economy back on track. "Companies like Bajaj Auto and Royal Enfield could be the beneficiaries of the trend," said Ramakrishnan.