New Delhi: India’s automobile industry has to wait at least until the second half of the next financial year for sales to bounce back, two top lobby groups said on Thursday, confirming that the sector will end the current accounting year with the first sales decline in more than a decade.

The prognosis by the Society of Indian Automobile Manufacturers (Siam) and Automotive Component Manufacturers Association (Acma) is that sales growth will only return in the six months starting October.

“Negative sentiment has deepened due to the current state of the economy. We only expect some growth in the second half of next fiscal. I do not expect it to happen before that," said Vishnu Mathur, director-general of Siam, the automobile industry’s lobby group.

Economic growth in the current fiscal year is forecast by analysts to fall even short of the 5% achieved in the last fiscal year, when the economy expanded 5%, the slowest pace in a decade. In the first half of the current fiscal, the pace of growth was 4.6%.

The downturn has been accompanied by obstinately high inflation, high borrowing costs and rising fuel prices that have made potential car buyers postpone purchases.

Sales of passenger vehicles in the first three quarters of this fiscal year declined 5.72% to 1.83 million units from the year-earlier period. In December, passenger vehicles sales fell 9.02% while overall automobile sales, including scooters and motorcycles, dropped 1.21% to 1.43 million units.

The expected decline in sales during the year to 31 March will be the first for India’s automobile industry since 2001-02, Mathur said. And the next year may not be too better.

Vehicle sales may improve in the quarter ending 31 March in the absence of any duty increases, given that the full budget for the next year will be unveiled only after the next general elections are completed and a new government assumes office.

“Yet, I do not see the industry to be in positive till October this year except for the two-wheeler industry," Harish Lakshman, president of Acma, said. “We do require a stable government at the centre for a turnaround in fortunes."

Some are hoping for consumer sentiment to turn for the better immediately after the general elections, expected to take place in April-May. That would require the elections to deliver a definitive verdict that results in the formation of a stable government.

“In my view, it is an emotional issue," said Pradeep Saxena, executive director at TNS Automotive, a sector-specific consultant. “I won’t be surprised if sales pick up in June, immediately after the general elections. It has happened in the past. We just need one big positive news and things will get back on the track."

A senior executive at one of the India’s top car manufacturers said car sales may pick up as soon as April, given the effect of last year’s low base.

“From April, low base of last year would start having an effect and month-on-month growth should start happening from June-July," the executive said, requesting anonymity because his company is a member of Siam.

Mathur of Siam cited some positive signs, with the centre accelerating some infrastructure projects and allowing states to buy at least 10,000 buses under the Jawaharlal Nehru National Urban Renewal Mission.

“Tenders for infrastructure projects have started coming out, which is a good sign. But what is required is to push the mining activities to revive the commercial vehicle segment and customers who are postponing their car buying decisions should come out and go ahead with purchasing decisions," he said.

Mathur is pinning some hope on the Delhi Auto Expo, India’s biggest automobile industry show, which starts on 5 February, to rejuvenate consumer interest. “Auto Expo is always a harbinger of good fortunes," he said.

At least 10 new models and 10 facelifts are expected at the auto expo. Some of the key ones include the new SX4 sedan and a compact car from market leader Maruti Suzuki India Ltd, the new City and Jazz models, the compact multi-purpose vehicle Mobilio and a small sport utility vehicle (SUV) from Honda Cars India Ltd.

Also expected to be showcased at the event are the Datsun Go compact car and Datsun Go Plus compact multi purpose vehicle from Nissan Motor India Pvt. Ltd and a compact SUV from Hyundai Motor India Ltd.

The current slowdown in automobile sales, one of the most prolonged for the industry, has forced vehicle manufacturers to revisit strategies and change tack, focusing more sharply on exports, higher localization of parts, a stronger rural drive and flexible manufacturing lines.

Adopted with the underlying objective of offsetting weak domestic demand and currency volatility, the strategies may get more pronounced in 2014.

“The timing of large investments get impacted due to a prolonged downturn. There will be re-scheduling of investments if situation does not improve," Mathur said. “Auto parts makers are the worst hit. While we have seen job losses in the form of some casual and temporary workers, some firms have also offered VRS (voluntary retirement schemes) to white-collar employees."

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