The domestic passenger car market suffered its worst phase in more than 12 years when its sales dropped by 26 per cent during February '13. The primary reasons behind the sales decline are believed to be weak economic factors like ever increasing fuel costs and peaking motor vehicle finance rates in the country. As per the apex body Society of Indian Automobile Manufacturers (SIAM), the Indian car makers registered sales of 158,513 units during February 2013, in contrast to the 213,362 units sold in the year-ago period. Further, last month's sales saw the fourth consecutive monthly drop and were the largest fall since December 2000.
SIAM has warned the Indian auto industry that passenger vehicle sales could fall by a greater margin during the financial year, since all major segments are looking weak and showing signs of slowdown. Expressing his views on the February '13 sales slump in the domestic car market, Sugato Sen, Deputy Director General, SIAM, was quoted as saying, “There is no incentive to buy new cars or replace the older ones. We expect the slowdown in sales to continue for the larger part of 2013, beyond the current fiscal year that ends in March. The real impact is felt more at the bottom of the pyramid for people who buy the smaller cars as demand for entry level compact cars have dropped significantly.”
The slackening sales figures recorded by Indian auto makers are mostly due to rising prices of petrol and diesel, high interest rates and a prevalent negative sentiment towards investing in vehicles. The unfavourable interest rates complement the weak economic situation and surging inflation in the country. Accordingly, the domestic car buyers had to adjust their budgetary planning in order to accommodate a new vehicle in their lives. The overall slow sales registered in the market have also led top car makers, such as Maruti Suzuki, General Motors India and Tata Motors to implement output production cuts at their manufacturing facilities.
The 2013-14 Union Budget has not been of much help to the Indian auto sector as well. This year's budget was chided by most auto makers over its decision to hike excise duty on Sports Utility Vehicles (SUVs), imported motorcycles and cars. Speaking his mind over the Union Budget's impact on the market, Rakesh Srivastava, Vice President, Marketing and Sales, Hyundai Motor India Limited (HMIL), has been quoted as saying, “Utility vehicles have shown consistent growth with demand pitching in from the younger customers. The budget proposal to increase excise duty from 27 per cent to 30 per cent would increase the divide with hatchbacks and sedans and hamper future growth.”
Industry experts also feel that the slackening sales figures are bugged down due to a weak retail demand. Expressing his opinion on the sales-hit Indian market, Hitesh Goel, an auto analyst at Kotak Institutional Equities, said, “We believe the recent increases in fuel prices and high interest costs contributed to the high cost of ownership and lead to subdued demand. Our dealer checks indicate weak retail demand, as average discounts on petrol car models remain high and waiting periods have come off for diesel cars.”