Automotive Mission Plan likely to miss targets

India may have emerged virtually unscathed from the global economic downturn but its Automotive Mission Plan (AMP) has taken a hit. Vishnu Mathur, SIAM’s new director general, says the targets of the AMP may have got pushed by a year to a year and a half due to the economic downturn. Mathur says that unless there’s a further dramatic upturn in the industry to make up for the impact of the slowdown, the industry body will have to revise its projections.

The AMP 2006-2016, released in January 2006, envisaged a substantial jump in the industry’s turnover from $34 billion in 2006 to $122-159 billion in 2016. The estimate includes revenue from domestic and exports businesses of both OEMs and component makers. The AMP envisaged that the auto sector would double its contribution to the country’s GDP to 10 percent by 2016.

The automotive sector, which grew 27.6 percent in the first two months of the current fiscal, also appears to be heading towards some moderation in terms of growth rate. While the positive growth trend is going to continue, the high year-on-year growth rates are bound to fall in the coming months. Sales in May 2010 have shown quite strong growth on a year-on-year basis but on a sequential basis, they have fallen. Mathur says these growth rates of 30-35 percent or above are not sustainable over a period of time. “What we are possibly seeing is the correction. The first two months of a year are possibly not the best to gauge this while the last two months of the previous year are the best,” he adds. For the year, SIAM is expecting a high double- digit growth which may either be 15-20 percent or 15-25 percent. ‘The high growth rate that you see today is not sustainable over a long period of time,” he adds.

As regards May sales of CVs, he says that has to be seen in the background of the low base in May 2009.When numbers improve, the growth will be moderate in terms of percentage, Mathur says. With regard to emissions, Mathur says the issue has been sorted out, though a little late. These developments have to be seen in the context of the likely increase in fuel prices. Last fortnight, an Empowered Group Of ministers deferred its meeting at which they were to decide on the quantum of a fuel hike. The fuel subsidy has become pretty much unsustainable and the government will have to at some point bite the bullet. In addition, a tight money policy will impact vehicle financing and this will have its impact on sales.

As this issue goes to press, it is still too early to predict what the impact of the rains will be. A good monsoon will spread cheer and boost demand from the hinterland. That will help the auto sector in the short to medium term.

On his new role as the director-general of Siam, Mathur says that the OEMs and component makers are all part of one family and his role would be to facilitate discussions by sitting around one table to discuss key issues rather than across the table. l May 2010 sales analysis, p34