Tough time for auto industry until early 2012: ASSOCHAM [Feb 2012]

February 10, 2012 7:02 am

The automobile industry in India may feel the heat until the initial months of financial year 2012-2013. A study by the ASSOCHAM states that this is likely to happen owing to the reduction in demand of cars, primarily because of the increase in prices.
“Rising interest rates, steep and steady rise in input costs, unregulated price hike in raw material, sudden depreciation of rupee against major currencies together with labour pangs are certain key reasons behind the alarming drop in passenger car sales which shrunked to just over 4 per cent between January and November and dramatically rose to nearly seven per cent in November,” said  DS Rawat, Secretary General of ASSOCHAM while releasing the chamber’s analysis on ‘Indian Auto Industry: The Year Ahead’.
“Besides, global disturbances like a slow pace of economic recovery in the United States, a sovereign debt crisis in the Eurozone, sluggish economic growth in Japan and a slowing Chinese economy are other significant reasons due to which automakers in India have been finding it difficult to keep their margins intact,” said Mr. Rawat. Despite the rising input costs most of the car makers reduced the prices and offered a plethora of discounts to spur car sales in 2011 amid rising competition in the auto industry. “To make up for the losses incurred due to discount offers and inflationary pressures resulting in sharp rise in lending rates for car loans by banks, the Indian automakers are all ready to hike prices of their passenger cars by one to nearly 10 per cent in the first half of the next year,” said Mr Rawat.
“Automakers must revise their marketing strategies, launch diesel variants, promote easy availability of finance options to woo the customers and keep a tab on tier II, III cities and the rural areas as these markets are going to spurt the car sales in the recent future,” said Mr Rawat.