Indian auto sector uncertain of festival boost

Indian auto sector uncertain of festival boost
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First Published: Wed, Sep 05 2007. 04 42 PM IST
Updated: Wed, Sep 05 2007. 04 42 PM IST
New Delhi, 5 September Top vehicle maker, Tata Motors said today it does not expect a sales surge during this year’s festive season, and the government said it was ready to help the sector sustain growth.
Leading passenger car manufacturer Maruti Udyog, 54% owned by Suzuki Motor Corp, said it would keep offering sales incentives but did expect demand to pick up in the holiday period, which is now underway and runs until the end of the year.
”Demand in festive season may not improve unless interest rates fall significantly and stay low,” Tata Motors Managing Director Ravi Kant told reporters on the sidelines of an industry conference.
Automobile sales usually surge into the end of the year, when workers are paid bonuses and firms lure buyers with discounts.
This year, higher interest rates have hit domestic demand as most customers take loans to buy cars and trucks, while exports have been hit by the rupee’s appreciation.
“It has been a double whammy for the auto industry,” Kant said.
Tata Motors’ passenger vehicles sales fell 5% in August from a year earlier and commercial vehicle sales fell 1.6%.
Maruti’s sales rose an annual 27% in August, and the company said while it expected demand to improve, it would offer incentives to both dealers and customers for now.
“We will continue to offer something or the other to help boost demand. Demand should pick up in the festive season. Then we will see,” Managing Director Jagdish Khattar told Reuters.
The minister for heavy industries and public enterprises, Sontosh Mohan Dev, told the conference the government was closely watching the sector’s performance, which he said had been below expectations in the fiscal year that began in April.
“We are told that among various factors, availability of credit facility for the first-time buyer is a major constraint, coupled with increase in interest rate,” he said, adding the government would consider incentives to boost exports.
“We are keenly watching the outcome of second quarter. If need be, we will certainly intervene to sustain growth.”
Shares of top automobiles firms have decline sharply this year as domestic sales dropped after the central bank raised interest rates five times between June last year and March.
Shares in Tata Motors have fallen by nearly a quarter this year. Shares in leading motorcycle maker Hero Honda are down about 16% and Maruti shares are down about 5%.
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First Published: Wed, Sep 05 2007. 04 42 PM IST