Indian Auto Companies Signal Major Economic Slowdown

TC Malhotra contributes to MetalMiner from New Delhi.

Source: Business Standard

Slowing sales due to rising interest rates and fuel prices have forced Indian automobile companies to tighten expenditures, even as some auto manufacturers have put their expansion plans on hold.

The impact of the slowdown has been seen on all sorts of vehicle production, including passenger cars, commercial vehicles and the two-wheeler segment.

According to a report published in the Business Standard, Hyundai, the second-largest carmaker operating in India, has stalled a roughly Rs 4 billion ($80 million) investment for a diesel-engine manufacturing facility in Chennai.

The newspaper report quoted Arvind Saxena, Hyundai’s director of marketing and sales, as saying that they are not making any decision on the diesel plant yet. But the company’s investments there are so high, he said, that it can only go forward and not backward.

Passenger car sales have been slowing in India since July. According to latest data released by Society of Indian Automobile Manufacturers (SIAM), the cumulative production data for April to October shows overall production growth of 13.7 percent over same period last year. However, passenger car and bus production has contracted during this time. Production in October 2011 also registered nearly a 2 percent decline as compared to October 2010.

The overall sales growth rate recorded for April-October 2011 was 11.8 percent. However, the month of October 2011 dropped 1 percent as compared to October 2010.

In October 2011, passenger cars, utility vehicles and vans all recorded sales declines of 23.8 percent, 0.4 percent and 17.6 percent, respectively. Overall passenger vehicle growth declined 20.3 percent.

Three-wheeler sales declined 0.4 percent in April-October 2011. Also, while passenger carriers declined by 3.9 percent during that period, goods carriers registered growth of 15.8 percent. Meanwhile, sales of mopeds, motorcycles and scooters all increased.

During April-October 2011, overall automobile exports registered a growth rate of 29.7 percent. Passenger vehicles registered growth at 19.5 percent in this period. Two Wheelers, Commercial Vehicles and Three Wheelers segments recorded higher growth rates of 29.9 percent, 26.8 percent and 45.5 percent, respectively, during the period.

In October 2011 compared to October 2010, overall automobile exports still registered growth of 14.6 percent.

–TC Malhotra

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