August witnessed increased car sales, but turmoil continues to woe auto sector

author image CarTrade Editorial Team
Monday 02 September 2013, 12:00 PM

The trend of continuous downfall in sales continues to woe the Indian automotive market. This turmoil is troubling major car makers as companies strive to implement different measures in order to mitigate the impact on their manufacturing facilities. Certainly, this is quite critical for sustaining business and maintaining the profitability. The major auto makers continue to be quite sceptical about sales as the rupee falls and fuel prices increase. Overall, the market conditions do not seem to be conducive for the organised auto sector of India. However, amid such vicious circumstances, August 2013 has certainly brought some hope, much to the likings of car makers, as sales went up. But, nonetheless, the situation still remains volatile for the auto sector.

It is notable that rising fuel prices along with the tough macro economic environment in the country have severed sales of passenger vehicles and two-wheelers over the last nine months. However, the passed August month did bring some relief as sales of passenger vehicles saw an year-on-year increment of 5 per cent to reach 1.8 lakh units. This growth was due to the low-base effect of August 2012 year as reported by the industry experts. It would be worth to mention that in August 2012 car sales had dropped down to 1.71 lakh units due to a strike at Maruti Suzuki's manufacturing facility in Manesar, Haryana.

According to the industry insider, the predicted car sales for the month of August was 1.06 lakh units that is around 14 per cent less than the last year. The overall passenger car market still shows signs of vulnerability as sales slumped down by big margin of 15 per cent to report selling of approximately 73,000 units. These figures are not suggestive of Maruti Suzuki's performance as the company is yet to reveal its August performance. More likely, the auto maker is expected to release the information about the August sales in few days.

Companies like Mahindra & Mahindra and Tata Motors are certainly in a desperate state as the decline in sales of the utility vehicles is expected to be a double-digit figure in August. Toyota Kirloskar is expecting to report a decline of 6.31 per cent year-on-year in its sales.

Pravin Shah, chief executive of automotive division at Mahindra & Mahindra, said, “The auto industry is going through one of its most challenging phases, and it is in desperate need of some short-term fiscal stimulus. The weakening rupee, resulting in increased inflation, is impacting cost of operations. Immediate action by the government is needed so as not to lose out on the upcoming festive season wherein sales could look up and bring some cheer for the auto industry and add additional revenue to the government.”

It must be noted that the impact of falling sales has critically hit the interests of the auto makers. A fair amount of time has already lapsed and situation still seems to be much aggrieved. The extent of damage can be just seen from the fact that the vehicle sales have now fallen for straight nine months. Measures to control such a fall have been taken by auto makers and dealers, but, the effect just does not show up in sales. Just to highlight and connect better, both, car makers and dealers are providing hefty discount on cars to lure domestic buyers. However, this too has failed to achieve the expected results. The reasons that can be attributed to such a crisis are many as mentioned before but, presently most serious issue is certainly a highly depreciated rupee.

As a result of this, car makers are under a continuous pressure to go for hike in prices. Evidently, without much choice left, companies are taking steps to raise the price of various models available in the Indian market. Many companies have already announced the price hike and now after General Motors, Toyota Kirloskar too on Sunday declared 1 per cent price increment on Camry petrol and Fortuner due to failing rupee in the international market.

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