Auto sales in India decreased for the financial year that recently ended – the first time in the past decade that it experienced a drop. For 2013, sales in the country are likely to be modest. As a result, many are casting doubts and raising questions on the upbeat expectations that led to global automakers betting billions of dollars in this market.
A couple of years ago, India’s auto market had the most promising growth (after China). However, the market suffered under increasing fuel prices, high interest rates, and a drawn out economic gloominess in the industry. So from an outstanding 30% annual growth, the market instead was characterized by enormous discounts, showrooms filled with unsold cars, and constant overcapacity. Global automakers like Ford Motor Co. and Volkswagen AG aren’t likely to consider leaving India because of its long-term potential, big population, and increasing incomes.
What’s expected is that those automakers that have invested huge amounts into the country will cut back on their expansion plans and prepares themselves for one more year of bad sales. When interviewed by Reuters, R.C. Bhargava, chairman of market leader Maruti Suzuki, said that its economy as well as the industry has significantly slowed down. SUV sales have been surging but those for smaller cars (which make up majority of the passenger vehicle market) have collapsed this year. Bhargava said that with the expected sluggishness in the industry for two or three years, companies have to consolidate operations, make the most of what they have, and be more efficient.
Last Wednesday, the Society of Indian Automobile Manufacturers said that auto sales in the financial year that ended March 31 decreased by an annual 6.7 percent. March sales plunged by an annual 22.5 percent. This is the steepest drop since the financial year that ended in 2001, when there was a 7.7 percent decline. In 2012, India’s sales rose by 2.2 percent. SUV and van sales are not included in the car data released by SIAM. Overall passenger vehicle sales, including SUVs and vans, increased by 2.2 percent in the financial year, standing for a 4.7 percent increase in the prior year.