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Car sales up marginally for first time since September

Tuesday, 11 March 2014 - 7:39am IST | Place: Mumbai | Agency: dna

Car sales grew marginally by 1.39% in February after witnessing a fall in sales since September last year. Excise cut in the interim budget of February 17, especially in small cars, two wheelers, commercial vehicles, to 8% from 12% have trigerred the upward move in sales after a lull.

According to the data released by industry body, Society of Indian Automobile Manufacturers (SIAM), domestic passenger car sales increased 1.39% to 1,60,718 units in February from 1,58,512 units in the same month last year.

Sales of motorcycle during the month climbed 5.39% to 8,43,307 units from 8,00,165 units a year earlier, while total two-wheeler sales in February rose 9.69% to 12,20,012 units.
However, sales of commercial vehicles (CVs) continued to witness a decline in February. Sales of CVs were down 29.84% to 47,982 units in February, SIAM said.

In order to revive the industry from an ongoing slowdown, the finance minister, P Chidambaram, reduced the excise duty by 4% on small cars and sedans and 6% on sports utility vehicles, following which manufacturers announced price cuts.

"It will take some more time to see if the negative trends have reversed. We are getting feedback from companies that footfalls have increased," Vishnu Mathur, director general, SIAM told reporters in New Delhi.

"Month after month, numbers have been so volatile that there is no trend visible," he added.

However experts feel that the volume growth is likely to return in the new financial year.

Automobile volume growth is likely to return to the past decade's 10-12% CAGR over FY2015-17 as the macroeconomic environment stabilises, fuel costs decline and interest rates stabilise or trend lower over the next few years, said a Kotak Institutional Equities report.

Car sales have remained subdued over the past two years owing to increase in fuel prices and high interest rates. "We believe cost of ownership will decline over the next few years," the report added.

"It seems that government incentives have had some effect on passenger car sales, albeit a rather small effect so far. Commercial vehicle numbers, on the other hand, indicate that the urgent need to fix the basics of India's economic model has not abated. This will be the key task for the incoming government,.Decisive action on the part of the new government will lead to an improved situation over the next 12-18 months," Wilfried Aulbur, managing partner, Roland Berger Strategy Consultants.

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