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Business News/ Home-page / Two-wheelers drag auto sales down 10.34%
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Two-wheelers drag auto sales down 10.34%

Two-wheelers drag auto sales down 10.34%

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Mumbai / New Delhi: The steepest monthly decline in two-wheeler sales in eight years, dragged down vehicle sales in February, as buyers kept away from the market anticipating a cut in excise duties in the annual Budget and banks stayed reluctant lenders. And early indications are that the excise cut of 4 percentage points on bikes and most cars isn’t driving up demand, although auto firms aren’t giving up hope yet.

Two-wheeler sales fell 14% in February from a year ago, with Bajaj Auto Ltd being the worst hit among the top three bike makers.

DIFFERENT TRACKS (Graphic)

“Inquiries have increased. The first two or three days after the Budget, they jumped up. But sales are not happening," said Prem Bagga, president of Automobile Traders Association of Delhi, who sells Bajaj bikes and Maruti cars. “Banks are still a big problem—they are not clearing finance.... They are an issue in both cars and bikes. Earlier we used to get clearance (for a loan) in one to two days now it takes up to six days," he added.

Banks and other financiers who extend loans to two-wheeler buyers have become more selective, especially about those who want to buy entry-level bikes, because a court ruling bars them from using aggressive tactics to recover dues.

Last month the finance minister cut excise duty on small cars, two-wheelers and buses to 12% to help stoke consumption. The minister also cut taxes for middle-class Indians in the hope that some spare change may induce buying.

Car makers, on cue, passed on the cuts and reduced the prices on some models such as the Maruti Swift and Hyundai Getz by up to Rs20,000. Some auto industry executives say this will result in sales looking up this month.

“Excise rebates on small cars is going to spur sales in March," said Neeraj Bandhu, manager, South Asia vehicle forecasts at CSM Worldwide, a consultancy. “Since interest rates have reached peak levels, we expect rates to come down in the next quarter." However, with inflation crossing 5% again, a 10-month high, it is unlikely that the Reserve Bank of India will cut its policy rates.

February sales

Vehicle sales fell 10.34% in February from a year ago, according to the Society of Indian Automobile Manufacturers, an industry body. Passenger vehicles grew at 7.5% from a year ago to 125,843 units, slower than 8.5% growth in January. Sales of cars, excluding utility vehicles, was up barely 2.3% over February 2007.

Maruti Suzuki India Ltd, which makes half the cars in the country, sold a mere 216 units more in February than a year ago, or 59,311 units.

The two-wheeler segment was the hardest hit with sales declining for the twelfth straight month, the longest continuous slump in at least a decade. Overall sales stood at 542,578 units compared with 632,712 units in February 2007.

“There has been interest (from customers after the excise cut)," said Venu Srinivasan, chairman and managing director, TVS Motor. “We hope to stem the decline in March." He did not elaborate if the interest translated into sales.

Among other vehicle categories, commercial vehicles grew 1.69% to 45,059 units while sales of three-wheelers slumped 15.7% to 28,547 units. Still, purchases may pick up later in April, when the lower income tax they have to pay will start reflecting in some Indians’ pay cheques.

(ammar.m@livemint.com)

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Published: 11 Mar 2008, 12:22 AM IST
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