Festive season fails to cheer automobile industry

Domestic car sales fell for the second consecutive month in August, down 10% to 144,156 units as against 160,713 units sold a year ago, as rising interest rates on car loans and higher fuel costs continued to dampen demand. 

Despite the onset of the festival season, many big car makers reported declining production of popular models to rationalise dealer stocks.

Data released by the Society of Indian Automobile Manufacturers (Siam) shows that only 1,143 units of the Tata Nano were manufactured this August against 7,7,39 units in the same month last year; General Motors India produced only 660 units of the Spark (2,497); Hyundai Santro production stood at 9,356 units (12,149) whereas the combined production of M800, A-Star, Alto and WagonR was lower by about 20,000 units at 53,450 (73,766).

Even the popular Ford Figo was suffering, with production down to 6,935 units (7,621) while the combined production of Tata Indica and Indigo CS was 11,233 units (12,381).

If we look at the big picture, Maruti Suzuki India’s passenger vehicle production (cars and UVs) was down by almost 22% to 83,338 units whereas Tata Motors produced 27% less passenger vehicles at 22,752 units.

Hyundai Motor India managed to log a modest 2.27% growth in manufacturing at 50,523 units by aggressively promoting exports. Fiat India’s production was less than half (down 54%) to 892 units; Hindustan Motors also produced 54% less cars at just 503 units while Ford India’s production was almost flat at 9,316 units. Total passenger car production fell 9.6% to 182,402 units (201,034).

SIAM has already indicated it may cut car sales growth forecast for this fiscal to 10-12 % from the earlier forecast of 16-18 %. Car sales zoomed by about 30% in 2010-11. During August, sales of passenger vehicles fell 5.9 % to 191,914 units (203,872).

Saugato Sen, senior director at SIAM, said, “Why car sales are down is because rate hike is creating a huge negative sentiment.” The Reserve Bank of India has raised interest rates 11 times since March last year.  Analysts say the high interest rates and vehicle costs may impact buyer sentiment this year.

But the slowdown in car demand was nowhere to be seen in commercial vehicles or motorcycles. This August, sales of trucks and buses rose 22.6 % to 64,248 vehicles (52,394). Motorcycle sales grew 15.4 % to 839,772 units (727,542).

Also, exports of passenger vehicles witnessed a robust growth with a rise of 34.9 % to 49,642 units (36,810).