Dun & Bradstreet India Prediction for the 2012 Automobile Market

Moderate Increase in the Sales of Domestic Automobiles

As per the report of Dr. Arun Singh, Senior Economist, Dun & Bradstreet India, automobile manufacturers did not record huge sales in the year 2011 as the Indian market suffered several setbacks due to the domestic as well as global economic conditions. Automobile sales registered 4.6% in 2011 (Jan-Nov) against 30.8% of previous year. Even though, the industry would not match the sales figure of 2010, it is expected that the auto industry’s growth in future would be boosted by various micro economic factors. Sales would improve due to the expected flexibility in the interest rates. Other factors such as the improved road infrastructure and infrastructure development would also contribute towards higher sales figure.

In the total export percentage of vehicles from India, the two-wheeler segment holds a major share. However, it is expected that exports of vehicles would not be confined to two wheelers alone as all segments will show considerable improvement. The Original Equipment Manufacturers (OEMs) from India are focusing on Africa and SAARC nations rather than depending solely on traditional European Market. For export growth, these manufacturers are also identifying new markets.

Impact of Macro Economic Fundamentals

Commercial Vehicles:

The year 2012 will be profitable for the commercial vehicle manufacturers due to stable economic environment. Apart from this, firm freight rates, higher freight availability and moderation in interest rates would improve the sales percentage of commercial vehicles. Periodic hike in the fuel prices along with the interest rates hampered the sales of medium & heavy commercial vehicles in the year 2011. However, the growth in service and the agricultural sector in 2012 would boost the performance of the light vehicle segment. Medium and Heavy Commercial Vehicles will also fetch good returns due to the sustained economic growth outlook.

Passenger Vehicles:

It is expected that the sales of passenger vehicles would improve in 2012 with the stability in economic condition and reduced interest rates. Other factors such as new product launches, increasing income and urge for higher lifestyle would indirectly contribute towards higher sales. Owing to the increasing petrol prices, the year 2012 will bring good returns for diesel car makers.

Two Wheelers:

The factors which would contribute towards the sales of passengers’ vehicles would also support the two wheeler market of India. Rise in disposable income would encourage people to go for two wheelers. In the two wheeler segment, scooters have already registered record growth in the last two years and it is expected that the momentum would continue in the coming year.

Initiatives by the OEMs in 2012

Sales figure in terms of domestic sales and exports would increase in the year 2012. There would be stability in the prices of raw material like steel and rubber. To sustain in the competitive market, which be flooded by car launches, the OEMs, will go for promotional activities. Due to the healthy demand supply relation, the OEMs will make some increase in the price of the vehicles to manage their extra production cost. Several initiatives such as productivity improvement and cost reduction programmes would be encouraged by the OEMs for maintaining their profit margins.

Strategic Insight

In 2012, the vehicle manufacturers are likely to adopt the following strategies:

Commercial Vehicles