New Delhi: The Indian automotive industry will see softening growth in 2011 due to price pressures and easing of pent-up demand, General Motors’ India head said on Friday, adding that growth of 12-15% for the sector was “reasonable.”
Car sales in India hit a record high in February, rising 22% to about 189,000 units, driven by a burgeoning middle class and easier access to loans, but higher input costs and rising interest rates are seen denting sales growth in coming months.
The Indian car industry grew by a record 31% in 2010 to 1.9 million units.
“I think everyone is back to thinking that it will be something like the original prediction for last year,” Karl Slym, president and managing director of GM India, said of the growth outlook for the Indian auto industry this year.
“Certainly softened because of the price pressures ... and also last year was really coming off a pent-up demand of the previous year when we had more of a recessionary time frame,” he told Reuters.
Slym said rising input costs, particularly of crude oil, steel, rubber and plastics, were “very worrying,” but that there were no current plans to raise prices of vehicles in India.
India’s largest carmaker Maruti Suzuki and rival Tata Motors have raised vehicle prices this year due to mounting input costs.
GM, which pulled off the biggest initial public offering in US history by raising $20.1 billion last year, will invest around $500 million this year in two India plants, Slym said, one each in the states of Gujarat and Maharashtra.
A number of global automakers in India such as Toyota, Honda , Volkswagen and Ford are also boosting investment in the country, responding to brisk demand.
GM India aims to grow at twice the rate of the country’s automotive sector in 2011, Slym said.
“Last year we doubled the growth of the industry in the country and our plan would be the same this year as well,” he told Reuters.
Asia’s third-largest economy, with its near 9% growth, remains attractive for automakers and global players have increasingly relied on growth in China, India and other emerging economies to offset weak sales in their home countries.
GM sold 110,000 vehicles in India last year, roughly the same amount Maruti Suzuki sells in a month.
The US automaker which has been in for 14 years, does not expect the Japan crisis to have an impact on its India unit, he said.
The company’s models sold in India include the Chevrolet Beat, the Chevrolet Spark and the Chevrolet Tavera utility vehicle.