The automobile industry rode through a rough patch in 2007, with high interest rates curtailing vehicle sales and customers postponing two-wheeler buys in anticipation of Tata Motor?s Rs 1 lakh small car. However, the race for Ford brands Jaguar and Land Rover, with two Indian companies, Tata Motors and Mahindra & Mahindra in the fray, and an array of car launches in the premium segment, helped the auto sector kick up some excitement this year. The two-wheeler segment limped through the year with some improvement in the third and fourth quarters, as volumes revived from the slowdown in the first half of the year.
A few new launches in the second half of the year from the stables of Bajaj Auto, TVS and Honda helped to revive sales, indicated an analyst from Religare. ?Margins will still remain under pressure in this segment,? he added. Gross interest rates were at screeching heights at 20.05% in FY?07, with a slight dip witnessed in H1?08 to 20%.
Diversifying into other segments was seen as the way to de-risk business by two-wheeler players who entered into strategic partnerships. Examples were the Hero Group forming a joint venture with Daimler and Bajaj Auto joining hands with Renault to make small cars. ?Two-wheelers are diversifying to have a taste of the growth expected in the other segments,? the analyst said.
Among the commercial vehicle and passenger segments, the former failed to make a mark this year, while passenger cars did not disappoint and posted a growth of 10%-12%, according to an analyst with PricewaterhouseCoopers.
The government?s plan to develop India as the hub for small cars has started bearing fruits, with all major auto manufacturers gearing up to strengthen their position in the fast-growing small car segment. While Honda Siel Cars India (HSCI) have announced plans to set up a small car plant in Rajasthan and to roll-out its first car in 2009 and Renault is teaming up with Bajaj Auto to develop a $3,000 car, market leaders like Maruti Suzuki India Ltd (MSIL) and Hyundai Motor India Ltd (HMIL) have launched their global cars Swift and i10 from India. This is just the beginning, with Tatas? much-awaited Rs 1 lakh car to hit roads in mid-April, followed by Maruti?s fifth global car A Star, to be launched in late 2008. It is believed that if these small cars become successful, the next revolution in the automotive sector will come from India. ?Small cars are very popular in the Asian markets and is now being socially accepted by the West as well,? an analyst said, adding that 70% of the cars produced in India belong to that segment.
Even players like Toyota and Ford, among others, are studying the possibilities of such a plan, with India and China being the focus markets for global players. The three big players like Ford, Daimler and GM are shifting from pricey locations to countries like India and China to curtail losses.?Global players are making products with these two markets in mind,? the PwC analyst added.
For the year ahead, the auto industry is expected to see a ?moderate growth,? with speculations of global economy slowdown and the general elections scheduled in the country in 2009. However, auto analysts believe that if interest rates come down next year, the sentiments may be revived.