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Worst is yet to come: Maruti

India's largest car maker Maruti Suzuki India Ltd has warned that worse could be in store for the domestic automotive industry already battling a slowdown in sales, as consumer demand for cars is likely to go down further due to high fuel costs and rising interest rates. Sumant Banerji reports.

autos Updated: Jul 28, 2011 22:13 IST
Sumant Banerji

India’s largest car maker Maruti Suzuki India Ltd has warned that worse could be in store for the domestic automotive industry already battling a slowdown in sales, as consumer demand for cars is likely to go down further due to high fuel costs and rising interest rates.

Maruti, which sells almost 50% of all cars in the country said the industry could end with a low single-digit growth by the end of the current fiscal year, a steep climb-down from the 30% growth registered in 2010-11.

"We have been saying this since January that the signs were not good but nobody believed us as everybody including us were growing," said Mayank Pareek, managing executive officer, marketing and sales, MSIL.http://www.hindustantimes.com/Images/HTEditImages/Images/29_07_11-buss25b.jpg

“Now, we are likely to see very tough times in the future and the industry as a whole may end up with just a low single-digit growth. Growth has slid to 8% in the first quarter and it will go down further in the next few quarters.”

Passenger car sales grew by only 7.3% year-on-year during the April-June period, the first time in 2 years that growth has come down to single-digit in a quarter. The pattern in which sales are declining mirror the slowdown in 2008 that had flattened the industry by the middle of the fiscal and had to be rescued by an extensive stimulus package from the government in December, the auto major said. This time, it said, there seems to be no silver lining.

“During a slowdown in India, the first-time buyer is not that affected and he still goes ahead and purchases a car,” Pareek said. “But those who are additional buyers or replacement buyers tend to hold back. During the boomtime the share of first-time buyers was 37%, which has now gone up to 42%. During 2008-09, this had gone up to as much as 49%. So it is a similar trend.”

The company is also less hopeful of the festive season, considered a good time to purchase cars, reviving the growth story. Further it added, the rural markets, which acted as the saviour in 2008-09, is equally squeezed.