Not fancy growth but some moderate improvement likely, says SIAM President

Even as car sales declined for the second year in a row by nearly 5 per cent in 2013-14, industry body Society of Indian Automobile Manufacturers (SIAM) on Friday said it was hopeful of slight recovery in the current fiscal in line with the expectation of an overall economic recovery and also some tax reliefs from the new government.

Domestic car sales in 2013-14 stood at 17.87 lakh units or 4.65 per cent lower than the previous year, according to the data released by SIAM. In 2012-13, car sales had dropped for the first time in a decade, by 6.69 per cent.

For overall passenger vehicles segment (which included cars, utility vehicles and vans), data show a decline for the first time in a decade dropping by 6.1 per cent during the year as a result of continued economic slowdown, weak consumer sentiments, rising fuel prices and high interest rates.

“Not fancy (car sales) growth but hopefully some moderate growth because there has been marginal improvement in GDP numbers in recent months,” SIAM President Vikram Kirloskar said when asked about his outlook for the current fiscal. He, however, declined to project any growth numbers. He was speaking to reporters here after the release of the data.

Asked about the expectations of the industry from the new government, he said, “Any new government that comes in will try to improve economic situation…we hope that a lot of knots that have come in the system are untied…we hope the excise duty cut will remain. There is room for further reduction in taxes as auto industry is one of the most taxed sectors.”

Mr. Kirloskar explained that the budget’s cut in excise duty on vehicles had not spurred sales growth as vehicles carrying the lower excise duty have just about begun entering dealer inventories and showrooms. So far, stocks were those from before the duty cut was announced in February. Other factors keeping potential car buyers away are high interest rates on car loans and the sentiment of poor job security owing to the economic slowdown, he added.

Consultancy firm PriceWaterhouse said it expected the passenger vehicle segment to bounce back latest by the first quarter of 2015. “While there may not be a strong growth, it could witness a growth of 3-5 per cent for the current fiscal year, that is, 2014-15. Medium to long term growth prospects of the industry, that is, 2016-20 continues to be bright,” PriceWaterhouse auto expert and partner Abdul Majeed said. Rakesh Batra, Partner & National Leader-Automotive Practice, EY, said, “FY14 turned out to be a difficult year for the Indian automotive industry.”

Mr. Kirloskar added that the slowdown in the sector had also led to job losses in the industry.

SIAM had not calculated the quantum of job losses, he said, adding, “I personally feel that across the entire value chain in the auto industry, from raw materials to dealerships, there could be around 1-1.5 lakh job losses”.

Additionally, Mr. Batra said auto manufacturers’ bottom lines were under “severe pressure” on two accounts: low capacity utilisation due to production cuts in the face of low demand and heavy expenditure on marketing. “So even government’s efforts to provide some respite to the sector by reduction in the excise duty in February this year has failed to attract many buyers in a market that is waiting to stabilise post the on-going polls,” he said. To beat slowdown, companies launched about 35 new cars in the market during the year besides introducing about 51 variant models. Introduction of new models normally entails heavy marketing costs. As per the data, commercial vehicles continued to reel under a prolonged slump, posting a decline of 20.23 per cent at 6.34 lakh units against 7.93 lakh units in the earlier fiscal. “Apart from the economic slowdown, commercial vehicle (CV) demand has been negatively affected by a slowdown in industrial output, a gradual rise in diesel prices, a slowdown in new infrastructural projects, and a ban on mining in certain states,” Mr. Batra said.

Two-wheelers, however, posted good growth of 7.31 per cent, helped by demand in rural areas, pushing total vehicle sales across categories during the year into the positive territory, lifting total vehicle sales by 3.53 per cent in 2013-14 to 1.84 crore units.

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