Auto body scales down growth of car sales

Mixed feelings: Car sales outlook remains unclear

Automobile industry body SIAM, on Tuesday, lowered car sales growth forecast for the third time to 0-2 per cent for the ongoing fiscal citing unfavourable macro economic conditions, but said the same could see a jump by 11-13 per cent in  FY13.

“The factors that are affecting the automobile industry such as high interest rates, inflation, high petrol prices and negative economic sentiments are still prevalent. Hence, taking those into consideration we see growth in the ongoing fiscal to be lower from the previous forecast,” Society of Indian Automobile Manufacturers (SIAM) S Sandilya told reporters at the 11th Auto Expo.

As per latest revised forecast, the overall automobile industry is expected to grow by 11-13 per cent this fiscal. The same for passenger cars has been pegged at 0-2 per cent, while that of two-wheelers are at 13-15 per cent and that of commercial vehicles at 18-20 per cent.

Earlier in October last year, SIAM had significantly lowered passenger car sales growth forecast for 2011-12 to 2-4 per cent due to lower output at Maruti Suzuki because of labour issues, and higher lending rates from 10-12 per cent predicted in July, 2011.

In October, SIAM had revised its projections for total sales marginally upward to 11-14 per cent for FY’12. It had also revised upward the projection for the two-wheeler segment to 13-15 per cent. Growth projections for commercial vehicles were revised northward at 13-15 per cent.

Sandilya said: “We don’t foresee interest rates going up further in the next fiscal. Also, there is expectation of stability on the fuel prices and all the other indicators are positive”.
He further said the auto industry is expecting RBI to reduce interest rates by 250-500 basis points in the next fiscal.

Based on these assumptions, SIAM said while the passenger cars sales will grow by 11-13 per cent in FY13, commercial vehicles will witness 12-14 per cent growth. The two-wheeler segment is pegged to rise by 11-14 per cent and three-wheeler segment by 6-9 per cent.
Asked about expectations from the Budget for 2012-13, Sandilya said the auto industry hopes that the Rs 15,000 additional duty imposed on big cars will be removed.

Stable outlook
However, ratings agency Fitch assigned a stable outlook for the Indian auto industry in 2012 and said passenger vehicles volumes are expected to grow by 3-5 per cent during the year, with car sales increasing by up to 4 per cent.

It said that commercial vehicles (CVs) segment is likely to register a higher volume growth of 8-10 per cent. “The 2012 outlook for the Indian auto industry is stable, driven by the expectation that the credit metrics of most companies, though may weaken, will continue to be in line with values expected during a cyclical downturn,” Fitch Ratings said in its ‘Outlook 2012: India Auto’ report.

It further said: “Fitch expects passenger vehicles (PVs) to register volume growth of 3-5 per cent in 2012, contributed by growth of 2-4 per cent in cars, 6-8 per cent in utility vehicles and 8-10 per cent in multi purpose vehicles.”