The Hindu Business Line : Auto industry sees decline in growth after 7 years

New Delhi, April 10 After seven years of successive growth, the domestic automobile industry has recorded a degrowth in the financial year ended 2007-08 as high interest rates and availability of finance weaned consumers away from vehicle purchasing. Production of vehicles in FY 2007-08 plummeted mainly due to declining motorcycle and three-wheeler sales in the country, said the Society of Indian Automobile Manufacturers (SIAM) on Thursday, while releasing the annual and monthly-March sales for the industry.

In the financial year ended in March, domestic vehicle sales fell by 4.70 per cent. During the year, motorcycles sales reported a sharp fall of 11.90 per cent to 57,68,341 units from 65,47,195 units. Lack of implementation of control on overloading along with issue of financing dragged sales of medium and heavy commercial vehicles by 1.66 per cent to 2,70,994 units as compared to the previous year. “The decline in sales has been mainly due to availability of finance, issue of repossessing vehicles and high interest rates which have led to lower sales” said Mr Dilip Chenoy,Director General, SIAM. “Availability of finance is a bigger issue than interest rates. If the first time borrowers are taken care of, then it could spell growth for the industry,” he said.

Passenger car sales

In March, among passenger car companies Hyundai Motor India Ltd recorded the highest growth at 29,396 units, an increase of 52 per cent. Maruti Suzuki, reported almost flat sales at 55,758 units.

During the month, both scooters and motorcycles reported a decrease in sales volumes. The scooters segment fell 5.07 per cent to 83, 022 units and the motorcycles to 5,06,884 units, a decrease of 0.04 per cent.

Commenting on the outlook for the industry, Mr Chenoy said, “The March sales are not an indication of the fiscal. It is only when April figures are released, it would be possible to gauge the trend of the current fiscal. But if this year nothing changes then it would be a similar trend to last year.”

He said that companies are facing pressure due to rising input costs but in a declining market, they are not in the position to increase prices. “Considering the steel used by manufacturers without including the components, the price hike required could range from Rs 750 at the bottom up to Rs 1 lakh for commercial vehicles at the top end,” cited Mr Chenoy.

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