India's Automotive Sales Outlook

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Passenger car sales of all leading carmakers in India have posted steady growth for the second month in a row in 2012, reports the Economic Times.

Market-leading Maruti Suzuki India Limited, 54.2-percent-owned by Japan’s Suzuki Motor Corp., has reported a 6.54 percent jump in sales at 118,949 units, compared to 111,645 units it sold in the same period of the last year. This includes 11,296 units for export, an increase of 11.8 percent.

Mahindra & Mahindra Ltd. (M&M Ltd) announced a 29 percent increase in its auto sales numbers, which stood at 43,087 units in February 2012, against 33,378 units in February 2011.

The company’s domestic sales stood at 40,461 units in February 2012, as against 31,967 units during February 2011, an increase of 27 percent. The Passenger Vehicles segment (which includes the UVs and Verito) registered growth of 33 percent, having sold 20,573 units in February 2012, as against 15,439 units in February 2011.

Speaking about the month’s performance, Pravin Shah, chief executive of Mahindra’s automotive division, said, “We are happy to maintain a healthy growth of 29 percent in February 2012, with all our brands doing well. While the XUV500 continues to create excitement in the market, the recently launched New Xylo has also evoked a very positive response from customers.”

Hyundai Motor India Ltd (HMIL), the country’s second-largest car manufacturer and the largest passenger car exporter, registered its highest-ever domestic sales numbers, growing by 12.8 percent over the same month last year.

Domestic sales in February were 36,805 units, exports were 15,050 units — registering a decline of 22.3 percent — and aggregate sales were 51,855 units, dipping by 0.3 percent.

“Even in the tough market situation, Eon sales have helped us to achieve the highest ever domestic sales,” said Arvind Saxena, director of marketing and sales for HMIL, when asked to comment on the February sales.

Tata Motors recorded growth of 9.16 percent in the passenger car segment with sales of 34,832 units in February. It had sold 31,909 units in the same month last year. Sales of the company’s Nano stood at 9,217 units during the month compared to 8,262 units in the same period a year ago, translating to an 11.56-percent increase.

Toyota Kirloskar Motors, a joint venture between the world’s largest carmaker Toyota and the Kirloskar Group, reported a whopping 79 percent increase in car sales to 16,659 units in February, driven by robust demand for its latest ‘Etios’ and ‘Liva’ models. The company had sold 9,308 units in the same month last year.

India, currently the second-fastest growing car market in Asia after China, suffered a slowdown last year mainly because of costly auto loans and rising fuel expenses.

The Society of Indian Automobile Manufacturers (SIAM) lowered its growth forecast for 2011-12 twice during 2011, after announcing its forecast for the first time at the beginning of the fiscal year.

According to SIAM, on a year-on-year basis, car sales in India declined in 2011 mainly due to the severe impact of labor issues on Maruti Suzuki India’s (MSI) production. A fuel price hike in 2011 also affected the Indian car segment along with the rising interest rates by the central bank.

India’s federal government deregulated the fuel price in June 2011. Since then, fuel prices were revised four to five times. The rough estimates suggest that the petrol prices were hiked by more than 50 percent in the year that not only affected the common man, but also affected the auto segment.

Another major reason for slow car sales in 2011 was a series of interest rate hikes by the Reserve Bank in the past year.

Since March 2010, The Reserve Bank of India (RBI) has increased the short-term indicative policy rate (repo rate) over a dozen times, which directly made all kinds of loans, including housing and auto loans, costlier.

The hikes were meant to ease inflation by curbing consumer demand, but they’ve had virtually no impact so far.

Where will India’s car market go from here? Continued in Part Two.

TC Malhotra contributes to MetalMiner from New Delhi.

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