A slowdown in the automobile industry is set to reverse by the year-end. The slowdown, which is cyclical in nature and occurs after every seven years, should come to an end in the next three months, according to the Society of Indian Automobile Manufacturers (SIAM), the country's apex automobile body.
"We have witnessed a dip in growth of vehicle sales lately, which should be attributed to the cyclical change that occurs after approximately seven years. The slowdown may be sustained in the next 2-3 months, but should ease off in the later periods, when the festive season starts. We will see a robust growth in the coming year," said SIAM Director Sugato Sen.
The growth in demand for cars, commercial vehicles and two-wheelers has dipped significantly in the last financial year compared with that in the previous year, owing to factors like spiralling raw material prices, drying up of credit and peaking interest rates.
According to the data provided by SIAM for the last 17 years, the industry has shown a similar drop once in 1992-93 and then again in 2000-01, both occurring within a gap of seven year between them.
Various top automobile companies, including Maruti Suzuki, Tata Motors, Hyundai, Bajaj Auto, Hero Honda, among others, are members of SIAM. Auto companies have geared up to tackle the slowdown through marginal and flexible reduction in production and through cost-cutting measures like reducing wastage and improving internal efficiency. P Balendran, director and V-P, corporate affairs, General Motors India, said, "The industry is currently passing through a slowdown phase. The volumes are only coming from new launches. The traffic in showrooms, as well as enquiry levels, has gone down significantly. We had projected a growth of 14-15 per cent last month, but an increase of just 6 per cent was registered. The industry will be in deep trouble if the problem is not sorted out soon."
General Motors is the country's fourth largest passenger vehicle manufacturer, which sells the Chevrolet brand of vehicles like the Tavera, Spark and Optra. The rising inflation level, which is pronounced in fuel prices, and high borrowing rates, have reduced the buying power of consumers, said senior executives of automotive companies.
The two-wheeler industry has been especially hit by a lack of adequate finance from banks in many of the key markets as a result of their pull-out due to rising delinquency levels.
K Sridharan, director (finance), Ashok Leyland, said, "We (the industry) are entering a very difficult time. There is pressure on margins due to the high cost of inputs. In addition, shrinking of finance has caused further problems in the industry."
Ashok Leyland is India's second biggest commercial vehicle manufacturer after Tata Motors. Although no negative sales were recorded in aggregate terms in segments like passenger vehicles and commercial vehicles during the last financial year, the growth was marginal when compared with that of the previous year.
The growth rate for cars stood at just under 12 per cent last year as against an increase of over 22 per cent in the previous year. Similarly, the growth in commercial vehicles was 4 per cent compared with a robust 33 per cent recorded in the year earlier.
Two-wheelers, meanwhile, posted a decline of almost 8 per cent last year as against an over 11 per cent growth in 2006-07.