SIAM issues reality check on auto sales

The Society of Indian Automobile Manufacturers (SIAM) has lowered its growth forecast for the industry for 2012-13 from 11-13 percent to 5-7 percent in view of the high interest rate regime, rising input and fuel prices and the volatility in exchange rates. Despite the slight decline in interest rates after the RBI cut the cash reserve ratio by 25 basis points and reduction of petrol prices by around 56 to 58 paise more recently after the dip in Brent crude oil prices to $ 115 a barrel, the effect is seen as too little, too late to affect the industry significantly, according to S Sandilya, president, SIAM.

In September, car sales faced the second largest downslide at 5.36 percent after the steepest 22.39 percent dip witnessed in 2001-02.

SIAM has, therefore, thought it prudent to revise its sales targets for 2012-13 with the passenger cars target being revised to 1-3 percent from the earlier 9-11 percent after April-September 2012 numbers posted a fall of 0.27 percent. However, the utility vehicle segment rode on the back of new model launches that included the Maruti Ertiga, Renault Duster, XUV500 and the new Mahindra mini-SUV, the Quanto. But Vishnu Mathur, director general, SIAM, says the compact SUV segment has dented passenger car sales – though it grew 55.83 percent during the period under review compared to the projected 29-31 percent, the growth is not all that high as the segment is still small. SIAM has revised its UV forecast to 50-52 percent.



According to the just released April-September 2012 SIAM data, overall growth in domestic sales is 3.62 percent over the same period last year. However, in September 2012, overall sales fell 9.43 percent over September 2011. Total passenger vehicle sales grew around 5 percent this September YoY. While the overall commercial vehicle segment posted a 3.71 percent growth in April-September 2012; M&HCVs registered negative growth (-12.49%), and LCVs grew at 16.04 percent.



Among three-wheelers, passenger carriers grew 4.29 percent but goods carriers experienced de-growth (-13.21%).

The two-wheeler segment grew 3.12 percent. While motorcycles declined by -0.79 percent, a surprise package was scooters which grew by 20.46 percent, with mopeds following at 0.80 percent.



On the production front, the industry produced 1,672,797 vehicles in September 2012 against 1,773,154 in September 2011, down 6 percent. For April-September 2012, production growth was 2.44 percent while exports were down 5.96 percent. While passenger vehicle exports rose 2.77 percent and CVs grew by 1.91 percent, those of two- and three-wheelers dropped by 3.75 percent and 30.91 percent during April-September 2012, respectively.

Mission delayed

In view of the current growth trends, the ongoing Automotive Mission Plan 2006-2016 that had projected a turnover of $ 145 billion for the auto component and automotive sector cumulatively will have to be further extended till 2026 for long-term decisions on investments and employment to be taken by the industry.

Sandilya fears the sales target under the AMP is not likely to be reached by 2016, as originally planned, as the last six years have not been good for the sector.

At current growth levels, a shortfall of 20-25 percent or about $34 billion is expected by 2016. And, even if the industry posts significant growth over the next four years, the shortfall will narrow down to 5 to 10 percent. The industry needs to grow at a CAGR of 16 to 18 percent to reach the targeted growth by 2016 which seems unlikely at present.

“Going forward, we need to watch interest rates, fuel prices, commodity prices and government policies and initiatives,” says Sandilya. He reiterates that existing sops for the sector should continue while the differential duty structure for vehicles should be snapped off.



SHOBHA MATHUR