Woeful situation in domestic market countered by increased exports

Wednesday 04 September 2013, 17:13 PM by

On one hand when auto makers are experiencing a slowdown in the domestic market, exports have become an unlikely source of balancing the loss of revenue. Currently, the situation of Indian auto market has played a role of detractor for passenger car sales. The demand has continuously dipped for straight nine months. As a result of this, major auto companies of the country are facing intense heat to maintain their business and profitability. The currency has plunged to a new depth with over 25 per cent depreciation since January 2013. Amid these desperate times, the export market seems to override the woeful situation that prevails in the Indian domestic market.

The reason is pretty simple: Auto companies who deal with the export of passenger cars and two-wheelers seemingly have made the most of rupee depreciation and have been able to post significantly higher foreign sales in August 2013. This has helped auto companies to counter, though partially, subdued domestic sales. Hyundai Motor India has reportedly posted a 29 per cent growth in its exports during the month due to rising demand in non-European markets. This has resulted in an increase of overall sales by a healthy margin of 11.58 per cent, despite the fact that domestic sales grew at a rate of less than 1 per cent.

Rakesh Srivastava, Senior Vice President, Sales and Marketing at Hyundai Motor India, reportedly said, “Exports have shown decent growth on account of strong demand from non-European markets. The domestic market continues to witness pressure.”

Maruti Suzuki, which is country’s largest car maker, also saw an increment of 181 per cent in its exports during the month as compared to the same time period last year with total number of sales increasing from 4,025 units to 11,305 units. R C Bhargava, who currently is the Chairman of Maruti Suzuki said, “It is a welcome sign that exports have done well. I hope it stays that way.” Earlier, Bhargava said that the depreciation of Indian rupee has helped company's export. Saying this, he also cautioned that global markets too were not conducive.

Evidently, the devaluation in rupee by over 25 per cent since January has been instrumental for auto companies as margins on exports have improved substantially. Bajaj Auto, famed for being India’s largest exporter of two- and three-wheelers, has posted a healthy increase of 10 per cent in its exports. The auto maker has done fairly well in most of the big African markets. According to a Senior Executive, the earnings on exports of motorbike is twice the value achieved in domestic market. Rajiv Bajaj, Managing Director, said that margins have improved due to that fact that export prices have not seen a slump. This in turn has helped to boost volumes and so, an increased profitability for the automotive company.

TVS Motors too posted increase in export sales to 27,425 units in August 2013 as compared to 17,934 units sold in the same month last year. Evidently, this means a healthy growth of 53 per cent. Notably, on the contrary, domestic sales of the company have fallen by 6.2 per cent. Yaresh Kothari, Analyst at Angel Broking, was quoted as saying, "The long-term plan will be to benefit from increasing exports. The outlook for the coming months will be of growth from festival demand.”

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