After years of record growth, the Indian automotive market will stagnate in 2012 as rising costs and high interest rates dampen purchasing power
December 8, 2011
by The Canadian Press
MUMBAI, India—Despite a seven per cent rise in sales in November, Indian car sales will likely miss its two to four per cent target, according to the Society of Indian Automobile Manufacturers (SIAM).
Rising costs and high interest rates have thrown a curveball at the world’s second fastest growing automotive market, making car purchases too expensive for much of the population in the booming country.
Indians bought 171,131 cars in November—the first rise in five months, but not enough to make up for prolonged sluggishness that has driven car sales down 3.5 per cent for the April to November period, according to SIAM.
Last fiscal year, car sales grew an unsustainable 29.5 per cent, leading SIAM to peg sales growth this fiscal year at 16 to 18 per cent.
Now, even two to four per cent growth for cars and four to six per cent growth for passenger vehicles—which include sport utility vehicles and vans—look unattainable.
Worst affected are sales of small, budget cars that form the backbone of India’s hyper-price-sensitive market.
“Repeated increases in interest rates and inflation and the fuel price hikes, these have created a lot of concern in the minds of potential customers,” said Sugato Sen, senior director at the SIAM. “The smaller lower-end cars have been impacted more. That segment is more sensitive to economic distress.”
Despite weakening demand, rising raw material costs and the plunging value of the rupee —which makes crucial imported components costlier—have forced some carmakers to raise prices.
Car sales at market leader Maruti Suzuki, whose production was also impacted by a prolonged strike, fell 18.7 per cent to 505,148 vehicles for the April to November period, according to SIAM data.
Ford’s car sales fell 6.1 per cent, to 58,620 vehicles during the same period, while car sales at Tata Motors fell 9.8 per cent to 147,350.