Tepid sales, labour violence mark a rough year for auto sector

Dec 27 2012, 15:58 IST
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In October, SIAM lowered car sales growth forecast to just 1-3 per cent for the fiscal, from the 9-11 per cent announced in July.  (Reuters) In October, SIAM lowered car sales growth forecast to just 1-3 per cent for the fiscal, from the 9-11 per cent announced in July. (Reuters)
SummaryAs the year progressed, excitement and optimism turned into gloom as sales fell in almost all segments.

12,40,688 cars have been sold – up just 1.28 per cent from the same period last year. Even the festive season failed to push sales with passenger car sales declining by 8.25 per cent in November.

Sales were hurt badly by rising fuel prices, high interest rates and overall low consumer sentiment. A big price difference between petrol and diesel added to the woes of those manufacturers which predominantly make petrol vehicles as demand for diesel cars soared.

This led to some NGOs and a section of the government seeking additional duties on diesel vehicles to discourage the subsidised fuel being used by the "affluent".

With stiff opposition from SIAM and manufacturers, the government did not hike levies on diesel vehicles but speculation is rife that in the Budget for 2013-14, it may

impose some additional duties on diesel vehicles.

Uncertainty of auto fuel policy became an issue for the industry, which demanded a long-term pricing roadmap of petrol and diesel so that they can plan their investments

accordingly.

On the other hand, Maharashtra government's VAT policy led to German auto giant Volkswagen putting on hold its plan to invest Rs 2,000 crore in India till around 2015.

Besides policy related issues, labour unrest hit Indian automobile sector hard during the year.

Maruti Suzuki India (MSI), the country's largest car maker, witnessed the worst ever worker-employee violence in its history on July 18 that left one senior executive dead and nearly 100 others, mostly from management, injured at its new Manesar facility in Haryana.

The incident forced a month-long lockout at the plant and the overall loss of production was about 77,000 units. The plant was reopened in August and the firm sacked over 500 workers alleging their involvement in violence.

The move by the management didn't go down well with many central trade unions, which demanded reinstatement of the sacked workers as the police charge-sheeted only 145 people.

However, the MSI management stood by its decision.

The cause of the violence remained unclear with the police's final report saying that it was a result of internal issues contradicted with that of the management's claim that

external elements were responsible for the incident.

MSI Chairman R C Bhargava, who even went to the extent that it was a pre-planed conspiracy by extreme left wing activists, reluctantly accepted the police report saying "Everybody has its own conclusion... It is something like an unknown disease by an

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