Sales flat, revenues skid 7% for auto industry

Written by Yogima Seth | New Delhi | Updated: Apr 17 2009, 05:20am hrs
Despite flat sales in 2008-09 vis-a-vis 2007-08, the net revenue from the total automobile industry in India has come down by over 7% because of high commodity prices, huge discounts and shift in product mix in the last financial year.

According to estimates by the Society of Indian Automobile Manufacturers (Siam), the net revenue has come down by 7.2% in 2008-09 in the domestic market at Rs 1,25,800 crore as compared to Rs 1,35,592 crore in the preceding financial year. The automobile sales in the country grew marginally by 0.71% at 97,23,391 units in 2008-09 as against 96,54,435 units in 2007-08.

Domestic demand had slowed down drastically last year mainly because of high interest rates and unavailability of funds as a result of which lot of inventory had piled up with all manufacturers. Subsequent to this, there was a surge of 4-5% in discounts and incentives from the auto majors to clear the stock, thus impacting revenues, said Abdul Majeed, auto analyst and partner, PriceWaterhouse.

Dilip Chenoy, director general, said, Siam, Cars like Santro and Indica were sold in the domestic market at 10-year old prices for a limited period and since these are among the largest selling models in the country, revenues have come down.

It is product mix that determines the overall revenue. Though commercial vehicles constitute a small part of the total sales (around 3.9%), these are high priced products, especially the medium and heavy commercial vehicles. Since the sales of commercial vehicles have taken a huge hit in 2008-09, the overall revenues have come down last year, says Rakesh Batra, national automotive head, Ernst & Young.

As per Siam, commercial vehicles have registered a decline of 21.69% in 2008-09 at 3,84,122 units as compared to 4,90,494 units in the preceding financial year.

Revenue from exports has, however, gone up by 20.98% in the last financial year at Rs 16,781 crore as against Rs 13,871 crore in 2007-08, mainly because of high depreciation of rupee vis--vis dollar. Total exports from the country has also gone up by 23.61% at 15,30,660 units as compared to 12,38,333 units in the preceding financial year.

The rupee has depreciated by 12-15% last year vis--vis dollar and this has straight away pushed up revenues by an estimated 15%, says Majeed, adding that since more cars are being exported now as compared to the completely knock down (CKD) units, it has added value to the overall exports.