Siam expects auto industry to pick up momentum in mid 09

New Delhi | Updated: Dec 31 2008, 05:20am hrs
Society of Indian Automobile Manufacturers (Siam) the apex body of automakers today said it expects the industry to shape up in a better way by the middle of next year, after it underwent a slump in 2008 with an estimated overall decline of 2% in domestic sales.

Given the present economic scenario, we expect that the performance of the Indian automobile industry would re mainmore or less the same. With the introduction of Cenvat cut, declining inflation rate and fuel prices getting stabilized at lower levels, we expect the industry to shape up in a better way by the middle of the next year, Siamsaid in a statement.

The industry body, however, demanded more help from the govenrment to help the beleagured sector. Going forward, the government should reduce excise duties on vehicle across the segments, especially utility vehicles and cars other than small cars, it said adding that consumer friendly finance options and increased lending by financial institutions at rational interest rates were needed.

This along with stable fuel prices will definitely ignite some demand, the apex body said. Further, SIAM said after maintaining a double digit growth rate over the past few years, the industry has undergone a slump in 2008 with an estimated overall decline of 2% in domestic sales.

The passenger vehicle segment has been estimated to have registered a marginal growth of 0.74%. Passenger cars recorded a growth by 0.5%, utility vehicles fell by 3% and multi purpose vehicles grew by 13% in the period January December, 2008, it said.

Cumulative sales of commercial vehicles and three-wheelers reported an estimated fall of 9% and 8% respectively, while the two-wheelers also dipped by one per cent during the same period, Siam said.

The apex automotive body said 2008 witnessed a substantial increase in the input cost, which was further worsened by the increase in fuel costs and hike in the interest rates by the financial institutions.

Some of the anti-inflationary fiscal measures adopted by the government also resulted in to severe credit crunch in the market. Overall, a lack of economic activities led to a negative market sentiment deterring the consumers from making immediate purchase decisions, it said.

Asking for more support from the government, Siam said, Favourable government policies for automobile sector, such as, excise duty reduction, stabilising the cost of raw material, further reduction in fuel prices, etc would play a key role in the revival of the industry in 2009.

The government has already taken certain positive steps to rejuvenate the industry by affecting the Cenvat cut. However in many cases this was negated by States raising Registration tax or imposing additional taxes, it said.

More steps are needed to spur demand including increased lending, rationalizing interest rates and revisiting the demands of the industry in the near term, it said.

Siam said there should be a reduction in excise duties on vehicles which still attract very high level of duty. There has to be simultaneous action on four different fronts-liquidity & interest, demand generation, ease of obtaining raw materials and components, and exports.

We need a big bang approach. Moreover, there should be an increase in the overall economic activity to infuse demand in the market, it added.