July 16, 2012: The news is not surprising. Sharp falls in various market segments have seen automakers cut production to reduce inventory levels. As a result, apex industry body SIAM has lowered its FY13 passenger car sales forecast, based on the industry’s performance in the first quarter of 2012.
Cars growth forecast: 9-11 %
The new forecast for passenger cars is 9-11 percent versus the projected 10-12 percent three months earlier and the actual 5.22 percent achieved in April-June 2012 (490,802 units sold in April-June 2012 versus 466,452 units in April-June 2011). The flies in the ointment are an increased cost of ownership, high fuel prices and interest rates. However, according to SIAM president S Sandilya, the car segment will witness higher growth if there are no further fuel price and interest rate hikes. At present, interest rates for car loan vary between 12-15.3 percent and those for CVs between 15-19.3 percent.
Sales growth of total passenger vehicles, comprising cars, utility vehicles and vans, has been revised upwards to 11-13 percent from 10-12 percent project earlier in April 2012. While vans are expected to record a growth of 3-5 percent, UVs are expected to notch blistering growth of 29-31 percent as against the projected 10-12 percent. In Q1 of FY13 sales of UVs rose to 117,711 units compared to 78,034 units in Q1 2011.
Data Source: SIAM
CV growth forecast: 6-8 %
The news on the Commercial Vehicle front is not so good, given the downturn in the economy. SIAM has now projected M&HCV sales in FY'13 to drop sharply by 6-8 percent compared to an estimated growth of 5-7 percent for FY13. Q1 2012 figures put sales at 66,055 units compared to 75,054 units in Q1 2011. Between April-June 2012 overall CV sales grew by only 6.06 per cent to 183,215 units from 172,751 units in the same period last year. A moderation in agricultural growth and a slowdown in industrial activities compounded by the halted CV sales to the mining sector has hugely impacted M&HCV sales.
LCVs are expected to fare better: a growth of 16-18 per cent as against a projection of 14-16 percent in April. Small CVs are also eating into the three-wheeler goods carrier segment and SIAM’s revised projections for overall three-wheeler sales is just 0-2 percent growth versus the earlier projected 5-7 percent.
2-wheeler growth forecast: 11-13%
The growth forecast for two-wheeler sales remains unchanged at 11-13 per cent, albeit an expected slowdown in rural growth is likely to affect motorcycle sales. However, a steady demand for scooters will drive the growth of the two-wheeler segment, said Sandilya. In the first three months of 2012-13, two-wheeler sales went up by 10.51 percent to 3,519,529 units from 3,184,774 units compared to Q1 2011. Motorcycle sales in Q1 2012 have increased by 6.79 percent to 2,628,949 units from 2, 461,862 units in Q1 2011. Meanwhile, the scooter segment witnessed a handsome 29.14 percent growth to 687,333 units in April-June 2012 compared to 532,240 units in April-June 2011.
The overall auto sales forecast, comprising all segments, has been revised from 10-12 percent to 11-13 percent. Comparing India with global markets, Sandilya said: "Japan and US markets are doing fairly well, while China, Brazil and Europe are not growing enough. Growth in India is moderating."