With high inflation and high interest rates putting a brake on the growth of passenger car industry in the last two months, it is time that auto manufacturers might rethink on their capacity expansion and their committed investment in the country, feels the Society of Indian Automobile Manufacturers.
?The auto industry finds itself in a difficult time and I am sure that everybody would be looking at these things, as to what can be postponed and what can be cancelled,? Ravi Kant, president, Siam said on the sidelines of Acma annual convention.
According to Kant, the huge investments that were announced into the country under the Automotive Mission Plan 2016 might change due to a slump in the domestic market. ?As far as the capacity is concerned, there would be a major rethink on that,? said Kant, adding that it is a serious issue as profitability and margins are getting squeezed.
Describing the current situation as serious and unique, he said the industry is also bearing the brunt of rising foreign exchange rate. ?We are having difficulty in the domestic market and, at the same time, we are having no respite from fluctuations in other currencies that are impacting the import and import from the country,? he added.
After a double digit growth for the last few year, July was for the first month when the sales of passenger cars fell by 1.71% at 87,724 units as compared with 89,250 units during the same month last year.According to Abdul Majeed, auto analyst and partner, Price Waterhouse, the situation will continue to be the same for another 12-18 months till there is some cooling of interest rates.