Auto sales may rise 10-14% this fiscal

Auto sales may rise 10-14% this fiscal

New Delhi: Automobile sales in India, home to two of the world’s top 10 car plants, will continue to rise in the year that began 1 April as faster economic growth bolsters demand following the best performance in six years by the industry.

Sales rose 25% from 1.5 million units to 1.9 million units in the fiscal year ended 31 March as new model launches improved consumer sentiment and increased financing resulted in buyers flocking to showrooms.

Increased highway construction activity resulted in operators increasing fleet sizes. Truck sales jumped 38% to 531,395. The Society of Indian Automobile Manufacturers (Siam) expects light truck sales to grow fastest this fiscal followed by cars. At nine cars per 1,000 India has one of the lowest car penetration rates in the world.

“We expect the industry to grow between 10% and 14% this year," said Pawan Goenka, president of Siam, an industry association. Growth may slow in the next few months before resuming in the latter half of the fiscal, he said.

The immediate damping of demand may result from price increases because of rising commodity prices and higher interest rates, Goenka said. New emission norms and the recent hike in excise rates could also deter buyers said Goenka, who estimates the combined impact to bump up prices by 7-8% in the coming months.

The slowing may be exaggerated because of the high base effect on last year’s growth figure, the association said. Sales in 2008-09 had been hit hard following the global economic crisis, with the industry registering almost no growth.

“After a record-setting fiscal year for most auto companies, we expect volume growth to slow in fiscal year 2011," wrote Macquarie Research in a recent note. Siam expects domestic sales to drive growth as exports slow due to the withdrawal of incentives by several European governments.

Some car makers such as Hyundai Motor India Ltd are working on exporting to new markets to offset the decline in sales from Europe. It recently began exports to Australia.

The Automotive Mission Plan targets one million car exports by 2016. Last fiscal the industry exported 441,710 cars. In the same period, domestic auto sales are expected to rise to 4.5 million units. Rural sales are likely to be another driver of growth. Maruti Suzuki India Ltd, the country’s largest car maker, expects this to account for 16% of total sales by next fiscal, up from 12.5%.

Two-wheeler sales ended the year at 9.3 million units.

Both car and two-wheeler market leaders Maruti Suzuki and Hero Honda Motors Ltd saw their share fall below 50%. Maruti, which sold 870,783 units, had a 44% market share, while Hero Honda’s share stood at 48%. It sold 4.5 million motorcycles and scooters.