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SIAM predicts more pain for auto sector

autos Updated: Apr 08, 2009 22:08 IST
Hindustan Times
domestic automobile industry

The domestic automobile industry rounded off a forgettable fiscal in 2008-09 with sales growing only marginally by 0.7 per cent. Bulk of the impact of credit crunch and demand slowdown was borne by the commercial vehicle segment which slid by almost 22 per cent, its worst ever annual performance since 1991.

The showing was hardly any different in March this year. Overall domestic sales grew by 1.1 per cent during the month at 8.9 lakh units against 8.8 lakh units last year.

While 2-wheelers managed to grow by 2.4 per cent, led largely by market leader Hero Honda, passenger and commercial vehicles slid by 1.2 per cent and 26.2 per cent during the month respectively belying any hopes of an immediate revival.

The negative cues resulted in industry body Society of Indian Automobile Manufacturers’ (SIAM) predicting single digit growth in sales for fiscal 2009-10. This prediction too comes with a number of caveats like rationalisation of taxes on cars without which the growth is likely to be much lower. Currently, the excise duty on small cars is at 12 per cent while that on big cars is 24 per cent.

“Problems of finance including lack of reposession norms, high interest rates and liquidity continue to haunt the industry and it is only due to the stimulus packages in the last three months that we have managed to end 2008-09 in the positive zone,” said Dilip Chenoy, director general, SIAM. “We are looking at another uncertain and tough fiscal.”

SIAM's projections take into account sales of new launches planned during the course of the year including, Tata Nano, the bookings for which begin on Thursday.

The downturn has already impacted the investment climate with as many as four manufacturers including Renault-Nissan, Ashok Leyland and Honda Siel Cars India deferring their plans.