Automobile industry worst hit in 2013

Automobile industry worst hit in 2013
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Automobile Industry Worst Hit In 2013. There were however exceptions like the scooter and tractor sectors that bucked the general downward trend, industry officials and research analysts said.

Chennai: A combination of factors - the general economic slowdown, high interest rates and increasing fuel prices - affected the Indian automobile industry to a large extent, resulting in a slide in sales volumes this calendar year.



There were however exceptions like the scooter and tractor sectors that bucked the general downward trend, industry officials and research analysts said.

"In a way, it is ironical that the Indian automobile industry is on the one hand witnessing new OEMs (original equipment manufacturers/vehicle makers) increasing investments and new car launches and on the other hand experiencing a decline in sales," Kenichiro Yomura, president, Nissan India Operations, told IANS.

At a time when the market was low, another Japanese company Isuzu Motors, while launching its SUV, said it would invest around Rs.3,000 crore ($485 million) in a manufacturing plant in Andhra Pradesh.

"The past year has been extremely challenging for the automobile sector as the general economic and consumer sentiments have failed to pick up from last year," P. Balendran, vice president, General Motors India, told IANS.

"Despite a slew of new product launches, the optimism and vibrancy in the market is completely missing. With the unfavorable macro-economic headwinds such as high interest rates, high fuel prices and inflation still looming large, the market is unlikely to pick up soon," he predicted.

On top of this, the increase in excise duty on sports utility vehicles to 30 percent has severely impacted the fast growing segment.

According to Balendran, even sales of diesel models, considered the backbone of the industry, are now waning away.

"The compact car segments are growing in India with more fuel-efficient products hitting the market. On the other hand, the lower hatchback segment has shown de-growth as first time buyers are shying away from showrooms due to the high cost of purchase, expensive loans and high fuel prices. Even high-end premium saloons are showing negative trends," Balendran remarked.

According to industry body Society of Indian Automobiles Manufacturers (SIAM), the sales of passenger vehicles declined by 5.34 percent during April-November 2013 over the same period last year.

"Within the passenger vehicle segment, cars, utility vehicles and vans dropped by 4.97 percent, 3.62 percent and 12.23 percent respectively during April-November 2013 compared to the same period last year," SIAM said.

The other sector that got hit the worst was the commercial vehicles segment.

"Last year, led by LCV sales, the commercial vehicles segment showed growth. But this year the LCV segment itself is down," Yaresh Kothari, research analyst at Angel Broking, told IANS.

According to him, freight rates remained flat or even declined while the diesel prices went up, eating into the revenues of commercial vehicle operators and thus delaying the purchase of new vehicles.

Kothari said that during Jan-Nov 2013, commercial vehicle sales went down to 691,840 units from 859,701 units in the comparable period the previous year.

Within the two-wheeler sector, the scooter segment logged good growth due to the increased capacities that met the pent up demand.

According to Kothari, between Jan and Nov 2013 scooter sales totalled 3,123,322 units - up from 2,992,658 units logged during the comparable period in the previous year.

Two-wheelers registered growth of 5.78 percent during April-November 2013 over April-November 2012. Within the segment, scooters and motorcycles grew at 18.70 percent and 3.32 percent respectively, while mopeds declined by 10.49 percent, SIAM said.

Kothari said sales in rural areas gained good traction during the period under review.

"Companies with an extensive distribution network gained because of that," he added.

According to Kothari, the rupee's depreciation enabled vehicle exporters increase their shipments and also their bottom lines.

During April-November 2013, overall automobile exports grew by 5.52 percent.

Passenger vehicles, three-wheelers and two-wheelers registered growth at 9.64 percent, 16.98 percent and 3.41 percent respectively, while commercial vehicles declined by 12.31 percent during April-November 2013 compared to the same period last year, SIAM said.

The year just ending also saw major vehicle recalls by Ford India and General Motors.

Ford India, the Indian subsidiary of American auto giant Ford Motor Company, announced the recall of 166,021 of its Figo and Classic car models to inspect and rectify problems in the rear twist beam and the power steering hose.

The problem for the other American company, General Motors India, was much bigger as it not only recalled around 114,000 units of its multi-purpose vehicle Tavera to sort out emission and specification issues also had to face a government probe.

The company also sent home several senior executives on this count.

Terming the current depressed sentiment as a temporary phenomenon, Nissan's Yomura said: "While elements like rising input costs and interest rates, the unstable rupee and fluctuating fuel prices are primarily detrimental to the health of India's economy, including the automobile industry, the colourful political landscape is also a significant contributor to consumer sentiment. With (general) elections coming up in 2014, it will be interesting to see how things change."

He said there is scope for more growth in the sub-B and B segments, and the compact SUV segment has just about begun emerging.

"In 2014, we will launch the Datsun brand, whose target customers are 50 percent of the total industry volume and which cannot be covered by Nissan brand," Yomura said.

"With the automobile industry struggling for the last 24 months, we were expecting a stimulus package in the last budget. Going forward, we expect the government to offer a stimulus package in next year's budget in the form of excise duties back to the 2008-09 levels for any hopes of revival," Balendran said.

"We expect the market to turn around only after a stable government is in place at the centre after the elections. Therefore, any signs of a turn around are expected to be seen only during the second half of next year," Balendran added.

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