In India, anyone who stands in public rearranging their purse would face a barrage of pleas from all sides. With the upcoming Budget announcement, the Indian government is experiencing much the same phenomenon.
The Society of Indian Automobile Manufacturers (SIAM) announced a fall in car sales for January ? the third consecutive month of decline ? and followed the news with a plea for a cut in excise duties in the coming Budget.
In January domestic sales of passenger cars fell 12.5 per cent year-on-year to 173,420 units and sales of vans were down 5.9 per cent compared with the same period a year earlier to 19,996 units. Sales of commercial vehicles were also down 9.5 per cent year-on-year to 63,218 units.
It is an illustration of poor consumer sentiment just days after the Indian government slashed its growth estimate for the year to March, bringing it down to 5 per cent. High interest rates, expensive fuel and uncertainty have been dampening demand.
After publishing the figures, SIAM requested a scheme for commercial vehicles under the government?s urban renewal policy and a cut in excise duties to prop up the sector. A spokesperson told reporters that there may be negative growth in car sales for the year ending in March ? which is especially bad news given that just four months ago SIAM was predicting growth in auto sales of up to 3 per cent for the same period.
Meanwhile, sales of utility vehicle are proving resilient in India. Domestic sales were up 40.7 per cent year-on-year to 49,014 units in January, boosted by the recent launch of new models ? from Mahindra & Mahindra, Renault and Maruti, in particular. But with the government gradually reducing diesel subsidies the advantage of buying utility vehicles ? which usually run on diesel, where most cars use petrol ? is slowly diminishing. And analysts are forecasting a shift in demand over the coming months, away from utility vehicles and back towards cars.
Many vehicle manufacturers close plants for annual maintenance in December and this is reflected in auto production figures. Total production of passenger cars was only 181,341 units in December, compared with 219,893 units in January. And Deepesh Rathore, managing director of IHS Automotive, says that this has had a lagged effect on exports. Where 51,121 passenger cars were exported in December, a 31.2 per cent increase year-on-year, only 40,929 units were exported in January, a 13.6 per cent fall compared with the same period a year earlier.
Domestic sales haven?t been boosted in the same way because disappointing sales in the festive season left Indian dealers with large stocks, so they aren?t putting in orders with manufacturers ? and it is at this level in the supply chain that SIAM records sales.
This is just one sector the government will be considering when it delivers its Budget. But can duties and schemes make up for loss in basic consumer confidence?
Related reading:
Maruti recovers after turbulent year, FT
Indian motorcycle sales, more representative than cars? FT Data
India?s falling car sales: it?s the diesel, beyondbrics
Source: http://blogs.ft.com/beyond-brics/2013/02/11/india-car-sales-down-and-glum/
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