Auto sales dip after seven straight years of growth

After seven straight years of growth, the Indian automobile industry declined 4.7% to 96.48 lakh units in 2007-08 against 1.01 crore units in the previous financial year. The automobile industry, which was plagued by high interest rates affecting local consumer demand, credit squeeze and rising input costs, interestingly reported a robust growth in exports (22.3% growth to 12.37 lakh units in FY08 as against 10.11 lakh units in last fiscal.) According to figures released by the Society of Indian Automobile Manufacturers (SIAM) yesterday, the total production declined 2.29% to 1.08 crore units against 1.11 crore units in FY07 as demand remained low.

The industry was largely impacted by the steep decline in two-wheeler sales, which reduced 7.92% to 72.48 lakh units in FY08 against 78.72 lakh units the previous year. Motorcycles proved to be the biggest dampener. It declined 11.90% to 57.68 lakh units in FY08 as against 65.47 lakh units of the previous year. Scooter sales, however, remained positive and grew 11.64% to 10.50 lakh units in FY08. Mopeds, on a slightly lower base, grew 16.63% to 4.13 lakh units in FY08 against 3.54 lakh units of the previous year.

Passenger cars sales, increased by 12.17% to 15.47 lakh units last year against 13.79 lakh units clocked in FY07. More than 50 new cars launched in the last fiscal pushed sales as the mid-size cars segment Maruti SX4, Tata Motors Indigo, Hyundai Verna grew the highest at 14.6% to 2,25,719 units while the B segment Maruti Swift & WagonR, Hyundai Santro & i10, Tata Motors Indica grew 14.1% to 8,59,137 units. More than 60 new cars and models are expected to hit the market in current year, which is likely to keep the sales momentum going.

The commercial vehicle market posted positive sales on the back of strong sales growth in light commercial vehicles (LCV) and buses. The total LCV market grew 12.29% to 2,15,823 units last fiscal and buses grew 34.72% to 38,655 units.

The industry is fighting the credit squeeze problem in the market, which has affected much more than the prevailing high interest rates. The lack of finance in semi-urban and rural areas and the rising fuel cost are worrisome trends and are likely to hit the industry in the current fiscal too.