Friday January 2, 08:43 AM

Source: Indian Express Finance

Auto sales skid again

By Corporate Bureau
Despite hefty discounts and offers, passenger cars and two-wheelers once again registered decline in sales during December as consumers continue to postpone purchases due to high interest rates. Maruti Suzuki India, the country s largest passenger car manufacturer, registered a dip of 10.3% in domestic sales at 52,029 units in December as compared to 58,401 units during the same month last year. Even sales of General Motors India were down by 35.9% at 4,041 units vis- -vis 6,309 units in December last year. The compact cars have once again taken a hit vis- -vis sedans. The entry-level A2 segment, which comprises of Alto, Wagon-R, Zen, Swift and A-Star, witnessed a drop of 6.9% at 36,831 units as against 39,575 units during the corresponding month in 2007. On the contrary, sales of the A3 or the sedan segment that comprises of SX4, Esteem and D zire went up by 98.2% at 6,524 units vis- -vis 3,291 units in December of 2007. Apart from the fact that interest rates continue to be high, banks are not willing to grow their auto portfolio and even customers are not confident of their cash flow. Since all forces are acting against the industry, it has pulled down the overall sentiments despite some kind of stimulus package recently announced by the government, says Abdul Majeed, auto analyst and partner, Price Waterhouse. According to Vaishali Jajoo, senior auto analyst, Angel Broking, it is the overall slowdown in the economy that has taken its toll on the sector. The economic slowdown and consequently the negative sentiments that have been holding back the purchase decision of car buyers will take one or more quarters to come back to normal, she says, adding that the overall passenger car industry is expected to end up negative. Despite the 4% reduction in excise duty and another stimulus package expected for the industry in few weeks, no significant turnaround is expected in the first and the second quarter of 2009-10, adds Majeed. This is for the third consecutive month that passenger car sales have declined. According to the Society of Indian Automobile Manufacturers , the passenger car sales went down by 6.58% in October at 98,900 units as compared to 1,05,877 units in October 2007. In November, there was a further dip of 19.4% at 83,059 units via-a-vis 1,03,031 units during the same month in 2007. Even two-wheelers did not fare better. Hero Honda Motor (HHML), the country s largest two-wheeler manufacturer with a market share of over 55%, posted a dip of 10.2% in December at 2,15,931 units as against 2,40, 532 units in the corresponding month of 2007, Bajaj Auto (BAJAJAUTO.NS : 2101.05 0), the second largest two-wheeler player in the country reported a dip of 32.7% in sales in December at 1,19,215 units as compared to 1,77,249 units in December in 2007. Going forward though, while the government s stimulus package has resulted in lowering of prices of two-wheelers, the industry might see further slowdown if the high two-wheeler financing rates and liquidity crunch continue, says Anil Dua, senior vice president, HHML.