Domestic car sales may be headed for its first decline in sales in almost a decade in 2012-13. What's more, the industry is set to put off by a whole decade an ambitious expansion target.
Auto industry set for 9-year low growth in sales
Sales have declined by 0.3% in this year so far on the back of four reversals in the last five months and there is little to suggest a turnaround any time soon.
Car sales last registered a dip in 2003-04 before the industry took off to emerge as one of the fastest-growing markets in the world. The momentum, which hit a peak in 2010-11 with a 30% growth, is clearly gone and high rate of interest, fuel prices and bearish sentiment have brought cars down in the priority list of customers.
"Going by the current situation, I do not think the industry will be able to recover in the fourth quarter," said S Sandilya, president, Society of Indian Automobile Manufacturers (SIAM). "Last year, the January-March quarter was very good...historic. It will be difficult to match that, let alone better that."
The problems may be deeper than just one bad year. While lowering the targets for the current fiscal year, SIAM admitted that the targets laid out in the Automotive Mission Plan will not be achieved and it has asked the government to extend it by another 10 years. At the peak of the bull run in 2006, industry had projected a turnover target of $145 billion (Rs 783,000 crore) by 2016 to account for 10% of the country's GDP and generate fresh employment for 25 million people under the AMP.
"We need to grow at a pace much faster than this if we have to meet these targets," said Sandilya. "We are running behind right now. Even if we grow at 10% every year, we will fall short by $34 billion. It will not take us 10 years to achieve it but we are behind schedule at least by 3-4 years."