New Delhi / Mumbai: A slowing economy coupled with tightfisted creditors resulted in sales of cars, trucks, bikes and three-wheelers falling a sharp 18% in November from a year ago, raising concern that the decline in the key manufacturing industry is nowhere near bottoming out.
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At least one auto maker, Mahindra Renault India Ltd, said it was closing production for three months. Hyundai Motor India Ltd, the country’s second largest car maker, said it was shutting its Chennai factory for a day a week at, joining others such as Tata Motors Ltd and Ashok Leyland Ltd who have already effected such production cuts.
Several others among India’s 37 auto firms, say industry executives, have slowed production without formal announcements.
Industry representatives and analysts cautioned that they did not see sales reviving before March despite last weekend’s 4% excise duty reduction and a stimulus package announced by New Delhi, and a cut in the policy rate by the country’s central bank.
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“This is going to take a few months to shake off,” said Rakesh Batra, a partner in the automotive group at Ernst and Young, an audit and consulting firm. “There is a fear psychosis setting in among consumers. They’re holding back on purchases particularly in the automotive sector.”
Interest rates for automobile loans have been rising steadily from 8-9% two years ago to 15-16%. So far, banks have shown little willingness to drop loan financing rates or revive lending. The slowdown in economic activity has further dented commercial vehicle sales and banks have reported rising defaults from transport companies. Some 95% of trucks, two-thirds of cars, and at least 40% of bikes sold in the country are bought on loans.
Commercial vehicles were the worst-hit with sales falling 49.5%, the sharpest fall since January 1998, according to Siam, or the Society of Indian Automobile Manufacturers, an industry lobby group. Truck sales were down to 20,637 units in November. Siam’s data is based on despatches from auto makers to dealers.
Car sales were weaker by nearly a fifth at 83,059 units, a decline of nearly 20,000, in November compared with the year-ago month. Sales of passenger vehicles, which in addition to cars, include utility vehicles and multi-purpose vehicles, fell 23.71%, the worst performance in eight years.
The percentage drop in auto sales was amplified by the fact that the festival season centred around Diwali fell in November last year, making for a high base while calculating change this year. The exception to an almost-overall slide were multi-purpose vehicles, vans like Maruti Suzuki India Ltd Omni and Versa models. Their sales rose 12%.
Three-wheeler sales were down 23%, while two-wheeler companies sold 14.68% less scooters, mopeds and motorcycles in the month.