Once the toast of the global automobile industry, India has quickly turned into the slowest among emerging markets such as China, Brazil, Indonesia, South Africa, Russia and Argentina, a bare two years after it became world’s fastest growing automobile market.
The domestic automotive industry declined by nearly 10% in the first 8 months this calendar year. Though much of this is blamed on the overall slowdown in the economy, other markets that are facing similar headwinds have performed significantly better. China, the world’s largest automobile market which India upstaged in 2010, grew by over 13% while car sales in Indonesia is at a historic high.
The only other countries in the red, giving India company, are Brazil and Russia with a 2% and 6.6% decline in sales in 2013 respectively.
“The market situation is the toughest in the last two decades,” said Mayank Pareek, chief operating officer, marketing and sales, Maruti Suzuki India Ltd. “Almost all segments are feeling the heat. Small cars are impacted badly because this segment of customers is most impacted by a slowdown. Everything from interest rates and inflation to fuel prices affects them.”
Sports utility vehicles, which had grown in high double digits in the last two years, are also reeling under the slowdown. The rapid increase in diesel prices this year combined with higher taxes on SUVs have hastened the fall. In June, India’s largest utility vehicle maker Mahindra reported its first monthly sales decline in nearly three years.
“It is partly because of the extra tax imposed on SUVs but also, due to increasing diesel prices,” said Pawan Goenka, president, automotive & farm equipment sector, Mahindra & Mahindra.
“In July, for the first time since May 2009, there was a contraction in the segment,” Goenka said. “It is tough to say when the segment will come back to positive territory, it will all depend on fuel prices and whether government has any rethinking on rolling back of extra duty in budget.”
The onset of festival season next month, traditionally an auspicious time for consumers in India to buy cars, is expected to spur a revival but the industry is not very optimistic. Last year, the industry rebounded in the latter half resulting in very high volumes that makes growth difficult this year.
“We have seen some revival from one month to the next and that will continue during the festive season,” said Sandeep Singh, deputy MD, sales and marketing Toyota Kirloskar Motor Ltd.