The year 2008 was indeed a spectacular year, in more ways than one, in the history of Indian automobile industry. Whereas new car launches, not to mention the buzz around Nano, kept the industry and car enthusiasts in high spirits, high interest rates, pull out of some financial institutions from vehicle loans, and the consequent shortage of funds, spoiled the party and restricted the industry?s growth.
According to the Society of Indian Automobile Manufacturers, the industry registe-red a cumulative growth of 2.47% for April-November at 66,25,988 units against 64,66,010 units a year ago. November saw the biggest decline of 19.4% in passenger car sales at 83,059 units compared to 1,03,031 units in the same month last year. This is indeed dismal when compared to the earlier growth projections of 8-10% for the industry.
While Nano, the world?s cheapest car unveiled by its visionary patron Ratan Tata at the auto expo in January, took the world by surprise, the Honda Civic hybrid also created a mark by being the country?s first hybrid car. All through the year, there were new models on road like the Chevrolet Captiva, the eighth-generation Honda City, Toyota Corolla Altis, Mitsubishi Outlander and the recently launched Maruti Suzuki A-Star, apart from variants of many models. But the story does not end here. Hyundai Motor India is all set to launch i20 towards the end of this year that will replace the company?s Getz in the European market.
Both A-Star and the i20 are export-driven models, but the fact that they would be made solely in India for other countries underlines the importance of India as a hub for the export of small cars. Renault and Nissan have joined hands with Bajaj Auto to develop a small car and even General Motors India is working on a car smaller than the Spark.
All this is not without a reason. As part of the Automotive Mission plan 2006-16, the government of India has set a target of promoting India as the hub of small car. Towards that, there has been series of reduction in excise duty on small cars. While in 2006 the Centre reduced the excise duty on smaller cars from 24% to 16%, in February 2008 this was further brought down to 12%, making these cars more cheap and affordable to the common man. Three weeks ago, government had reduced the excise duty on cars by 4%, prompting carmakers to bring down prices.
So much is the growth potential in the compact car segment that car major Honda Siel Cars India has advanced the launch of its first compact car, the Jazz, by six months.
While companies continued with model refreshments, high inflation and interest rates kept people away from buying inessential items. While inflation had touched a high of over 13% in May, interest rates on cars were hovering around 14-15% after a series of rate hikes. This slowed car sales, which went down by 1.71% in July at 87,724 units vis-?-vis 89,250 units a year earlier. In the very next month, the decline was steeper at 4.56% at 94,584 units compared to 98,893 units in August 2007.
Two-wheelers were the worse off. With rising number of defaults, financial institutions like GE Money, Citi Finance and later on ICICI Bank completely withdrew from financing of two-wheelers. However, a good harvest and farm loan waiver pushed up cash purchases in rural India. This coupled with Hero Honda?s policy of tying up with regional rural banks helped the sector to grow marginally.
Things worsened across the industry by October, so much so that Tata Motors and Ashok Leyland had temporarily shut down while Maruti Suzuki India, Toyota Kirloskar Motors and Honda Siel Cars India have cut down on production for inventory control.
Amidst the ups and downs, one thing that went unnoticed was that certain car models were available at lower rates in December 2008 compared to their prices in December last year, thanks to discounts and a series of duty reduction on these cars.
For instance, Maruti Alto Lxi that cost Rs 2,99,270 (on-road, Delhi) in December 2007 is now available at Rs 2,77,405, a saving of Rs 21,865. Even Wagon R Lxi, which earlier had a price tag of 3,59,162 is now available at 3,23,406 which means a saving of Rs 35,756. Similar is the case with Hyundai cars. Santro GL, the company?s largest selling car that was available last year at Rs 3,39,500 now comes at Rs 3,21,738 while its i10 Delite prices have come down from Rs 3,39,026 in October last year to Rs 3,25,927 now, a saving of Rs 13,099.
As 2009 about to set in, the slowdown bells are still ringing, though all companies have plans to raise prices from January. ?We will increase prices by 1-2% across all models from January 2 as the rupee continues to depreciate and inflationary pressures are making it tough for companies to further absorb increase in cost,? says Ankush Arora, vice-president (sales and marketing), General Motors India.