Car sales down for second year running, job loss pegged at 1.5 lakh

Written by PTI | New Delhi | Updated: Apr 11 2014, 22:32pm hrs
Car salesIn the 2012-13, car sales in India fell by 6.69 per cent, which was the first decline in a decade. Reuters
Car sales in India fell for the second consecutive fiscal in 2013-14 with a drop of 4.65 per cent as the auto industry continued to struggle with demand slump due to a sluggish economy that has led to an estimated job loss of around 1.5 lakh across the entire value chain.

According to data released by the Society of Indian Automobile Manufacturers (SIAM), domestic car sales in FY14 stood at 17,86,899 units as compared to 18,74,055 units in the previous fiscal.

In the 2012-13, car sales in India fell by 6.69 per cent, which was the first decline in a decade.

"Last year was one of the most difficult years for the industry. The business environment was tough due to low growth of economy, high interest rates, fuel prices and low sentiments," SIAM President Vikram Kirloskar told reporters here.

He said the decline in auto sales hit the industry hard and employment, mainly of contract and temporary workers, have been affected.

"We at SIAM have not done a calculation of how much job losses were there, but I personally feel that across the entire value chain in the auto industry, from raw materials to dealerships, there could be around 1-1.5 lakh job losses," Kirloskar said.

During the fiscal, total sales of vehicles across categories, however, were up 3.53 per cent in 2013-14 at 1,84,21,538 units as compared to 1,77,93,701 units in 2012-13, SIAM said.

Two-wheelers did well posting a growth of 7.31 per cent at 1,48,05,481 units as against 1,37,97,185 units in FY13.

Motorcycle sales in 2013-14 stood at 10,479,817 units as against 1,00,85,000 units in the previous year, up 3.91 per cent, SIAM said.

Scooters also posted a robust growth of 23.24 per cent during FY14 at 36,02,744 units as compared to 29,23,424 units in 2012-13.

Commercial vehicles, however, continued to reel under a prolonged slump, posting a decline of 20.23 per cent at 6,32,738 units as against 7,93,211 units in the earlier fiscal.

"The stalling of infrastructure development projects, ban in mining activities and overall slowdown in economy continued to hit the commercial vehicles segment," Kirloskar said.

On the outlook for FY15, Kirloskar said the industry was "hoping for a moderate growth or at least not to be in the negative territory".

When asked about the expectations of the auto industry from the new government post elections, Kirloskar said: "We hope the excise duty cut will remain. In fact, there is room for further reduction in taxes as auto industry is one of the most taxed sectors."

A growth-oriented policy that will spur manufacturing activities and overall economy to lift consumer sentiments will be crucial, he added.

On the export front, during 2013-14, car shipments were almost flat at 5,50,466 units as against 5,47,222 in the previous fiscal.

Overall auto exports from India grew by 7.21 per cent in FY14 at 31,07,893 units compared to 28,98,907 units in 2012-13.

SIAM said domestic passenger car sales declined 5.08 per cent to 1,71,489 units in March as compared to 1,80,675 units in the year-ago month.

Motorcycle sales last month climbed 16.24 per cent to 9,06,665 units from 7,80,022 units a year earlier, according to Total two-wheeler sales in March rose 21.16 per cent to 13,34,214 units as against 11,01,203 units in the same month last year.

Sales of commercial vehicles were down 24.55 per cent to 64,101 units in March, SIAM said.

Vehicle sales across categories registered an increase of 12.83 per cent to 16,77,445 units from 14,86,664 units in March 2013, it added.

Terming revival of economy as crucial to the growth of automobile sector, Kirloskar evinced hope that new government, which comes to power after general elections next month, would come up with policies to ensure GDP expansion.

"We are hoping that GDP growth will improve. We need more than 7-8 per cent growth in GDP for auto sales to grow," Kirloskar said.

Although there is improvement on some fronts such as the foreign exchange rates, the auto sector would benefit if the entire economy grows, he added.

With SIAM discontinuing its growth forecast in the wake of the slump, Kirloskar did not put any numbers on expected sales increase of different segments.

He said, however, that the auto industry was expecting moderate growth in utility vehicles and cars, and not being in the negative zone.

The light commercial vehicle (LCV) segment is likely to grow marginally due to gradual improvement in consumption demand from rural areas, he added.

"Two-wheelers are expected to grow, scooters especially, while buses are also expected to show gradual recovery," Kirloskar said.

When asked about expected investments in the sector this fiscal, he did not share a number but said in the previous fiscal, "around Rs 20,000 crore was invested by the auto industry" which included cost for around 35 new models launches and 51 refreshes.

Besides, capacity expansion, the companies also invested across the the value chain, from developing new models to upgrading technology during the fiscal, he added.

He also said the recent cut in excise duty has not helped much in spurring sales growth as the overall sentiments were still down.

Moreover, companies had to incur cost as the cut came unexpected and they had to compensate dealers, while reducing car prices at the same time, he added.

According to industry estimates, vehicle manufacturers suffered a hit of around Rs 500 crore due to the reduction in excise duty announced in the budget.

"We are unable to pass the the increase in cost of production to customers. All the manufacturers are in a tough situation," Kirloskar said.

When asked about a mandatory recall policy being planned by the government, Kirloskar said SIAM was co-operating with the government although the industry body was in favour of a voluntary policy.