Indian auto makers facing hard time in luring buyers to showrooms

Thursday 20 June 2013, 09:59 AM by

The Indian car market is going through a hard time at the moment and saw its sales dropping for the seventh successive month in May 2013. The weak economic conditions, healthy purchasing sentiments among domestic buyers, piling inventories and consistent losses are the main problems faced by automobile companies, as per industry experts. As an indirect outcome of the prevalent slowdown, the auto makers could also be forced to cut jobs so as to keep their revenue margins intact.

The car sales in the domestic market stood at 143,216 units during May this year, corresponding to a 12 per cent decline over the year-ago period. The sales numbers have been revealed by the apex industry body, Society of Indian Automobile Manufacturers (SIAM). Interestingly, domestic car sales had never dropped for seven consecutive months in the Indian auto market, since SIAM began recording data 16 years back.

Speaking his mind on the present market situation, Vishnu Mathur, Director General, SIAM, was quoted as saying, “This is a grave sign for the automobile industry as it's the longest stretch of consecutive car sales decline witnessed ever. Even during the 2008-09 downturn, car sales dipped for few months and recovered back strongly. These are worrying trends for the Indian automobile industry.” He further added, “This continuous decline is a combined factor of the overall economic situation.”

As per reports, Indian economy advanced by just 5 per cent during the 2012-13 financial year, which is half the rate it was growing with a few years back. Further, industrial output during last fiscal surged by small 1.0 per cent, since the investments took back seat due to ever increasing finance rates and bureaucratic problems faced by auto makers while working on their industrial projects. Further, the central bank has curtailed its policy lending rate by quarter of a per cent point three times this year, in order to bolster the prospects of an overall economic growth.

Several top automobile companies were forced to dish out attractive discounts and schemes so as to lure domestic buyers to their retail outlets, while still figuring out how to offset the rising losses. However, the slow market situation that had cropped up on the back of weak consumer sentiments and economic troubles remained the same. The auto makers failed to convince buyers towards investing in a brand new car and apart from a few, as many as nine automobile companies suffered from a monthly drop in sales in May 2013.

The piling inventories and increasing losses could eventually force Indian auto makers to cut jobs in their workforce. Speaking his mind on the same, Mathur said, “Obviously, if there is a decline in demand, there is an impact in the whole chain. More vulnerable are the suppliers. It (job cuts) has either started to happen or will happen soon if such a situation continues.” He further added, “People aren't confident of retaining their jobs.”

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