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Car, commercial vehicle sales fall in Dec

The Indian automobile industry, battling a slowing economy, had another bad month in December as sales plunged in two key segments, figures showed on Wednesday.

Car sales fell a steep 40.8 per cent in December to 31,847 units over the same month a year ago, according to the figures from the Society of Indian Automobile Manufacturers (SIAM).

The slide reflected declining corporate spending and higher prices, analysts said.

Sales in April-December slipped 8.3 per cent to 418,374 from 456,454 units.

Overall commercial vehicle sales tumbled by 33.3 percent in December to 12,866 units from 19,297 units in the same period a year ago. Sales in April-December were down 13.4 per cent to 101,593 units from the same period last year.

Analysts said there could be an improvement in the January-March quarter if the government gave tax breaks to the industry in its Union budget due on February 28.

Cars attract an excise duty of 40 per cent which the industry has asked be cut to 32 per cent.

"The fall in December car sales could be because of an enhanced year-end effect. People usually postpone car purchases at the end of the year to the next to improve resale value," said Abhay Kantak, an analyst at Inquire Motilal Oswal Securities.

Resale value crucial

Kantak said resale value was an important consideration in buying cars in India and the year of purchase was a crucial influence.

Analysts also said the current financial year was unusual due to the increase in vehicle prices caused by a realignment of local taxes in several Indian states and by the need to introduce new, cleaner engine technologies.

Analysts said commercial vehicle sales could be slightly higher in the next quarter.

"The January-March quarter is traditionally the best so there may be some improvement but even then sales may at best be flat," said an analyst at a foreign brokerage who declined to be identified.

Indian commercial vehicle sales tend to peak in March as companies rush to take advantage of tax breaks on purchases made before the end of the financial year.

Analysts said the decline in commercial vehicle sales reflected a slowing economy and higher diesel prices. Industrial production growth was flat at 6.0 per cent in April-November 2000 compared to 6.2 per cent a year earlier.

Some of the bulk freight traffic like the movement of petroleum products and containers to ports is increasingly shifting to the railways which compete with road traffic for moving goods, they said.

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