Car makers recite the same old story for October

Friday 04 November 2011, 17:57 PM by

The recent festive season did not have much in store for the car makers as the demand for their products remained adamant in October too, indicating a further interference by the slowdown in the coming months. According to the reports shared by companies, October surfaced as a below average month for car sales, being dented further by the strike-hit Maruti and negative posting of sales by Hyundai and Ford.

Maruti, the biggest car maker, was not only hit by abysmal sales but also by the strike at the company, which finally resolved recently but not before dismantling the production process at its plant. The company's sales in October fell to 52 per cent at 51,458 units against 1,07,555 units in the same month last year. Hyundai's plight, too, resulted in the company's sales in October to go down 5 per cent at 33,001 units against 34,720 units in October last year.

Sandeep Pandya and Ankit Mehrotra of Goldman Sachs stated that the average channel inventory for Maruti suffered a nosedive, coming to two to three weeks from the usual four to five week levels. They further added that the fiscal 2012 should be “a second consecutive year of earnings decline, mainly on higher technology costs (three percentage point impact of higher royalties since fiscal 2011)...and the recent industrial issues at the company’s Manesar plant.”

Exorbitant rates and discouraging petrol prices, amidst uncontrolled inflation, have given rise to untoward trends and companies are frantic as deteriorating demand does not seem to bid adieu so soon. "We have seen that sales get a boost in the festival season but this year the sentiment has been tepid. We do not expect a major upswing in the near future as the challenging economic environment is affecting industry," said Arvind Saxena, Marketing and Sales Director at Hyundai India.

Apparently, Hyundai Motor's condition can be termed as more critical as notwithstanding the entry-level Eon model that entered the Indian market, moreover, being the cheapest car offered by the company, its performance was poor. As a matter of fact, the company stated that it had received bookings for more than 9,000 units of the Eon. Ford also experienced a sales fall of 10 per cent in October at 8,091 units against 9,026 units in the corresponding month last year.

The players of the industry say that, the coming months would be crucial as car sales are expected to be low, primarily owing to high rates. The unfavourable scenario has already prompted the auto industry body Society of Indian Automobile Manufacturers to forecast a decline in car sales for this fiscal to 2 per cent to 4 per cent against the 16 per cent to 18 per cent growth estimation drafted for April. "The car industry is in a slowdown and it would take some time before demand picks up again," Society of Indian Automobile Manufacturers President S. Sandilya said.

Thus, with interest rates going up by nearly 3 per cent over the last one year, among other menaces, the car industry can very well sense the coming storm and undoubtedly requires a strong immunity in order to survive.

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