In the backdrop of a slowdown in auto sales, thanks to the recent spurt in fuel prices and mounting interest rates, the Society of Indian Automobile Manufacturers (SIAM) is set to lower sales growth forecast for 2011-12.
In his first admission that SIAM?s growth projection for the financial year could be unachievable, president of the apex body Pawan Goenka told FE that a meeting would be convened this month to come up with a new growth forecast for the fiscal.
He said a final announcement would be made once SIAM tabulates the June auto sales data. Earlier this month, the country?s top three carmakers ? Maruti Suzuki, Hyundai Motor and Tata Motors ? that account for over 60% of the cars sold in the country, reported a combined 4.3% drop in sales for June. As per Siam?s growth forecast for 2011-12, passenger cars sales were set to grow at 16-18%, which clearly looks impossible to achieve now.
?It looks very difficult to achieve now. We would be reviewing the growth projection in July,? Goenka said. He said that factors such as interest rates and fuel costs were causing some moderation in sales. Earlier this fiscal, SIAM had indicated that negative macro economic concerns could put a spoke in the wheels in the country?s booming automotive sector. This prompted SIAM to reduce its growth forecast for passenger car sales to 16-18% from almost 30% sales growth in the previous fiscal.
Last month, chairman of Suzuki Motors Osamu Suzuki sent shock waves across the industry when he said he expected its Indian subsidiary firm Maruti Suzuki to clock a growth of just 5% in 2011-12.
His statement in Japan made Indian carmakers sit up and take notice. A senior executive of an automobile firm told FE that since Maruti Suzuki mirrors the growth in the Indian car industry, Suzuki?s statement is significant. For instance, while car sales grew 30% in 2010-11, Maruti grew at nearly 25% during the year.
In June, Maruti?s domestic sales fell 3.8% to 70,020 cars compared to 72,812 cars in the corresponding month last year. This was the first time Maruti had reported a fall in sales since December 2008 when the economy was caught in the middle of a severe recession. Though the drop in sales were primarily on account of an 11-day labour strike in the company?s Manesar facility and a week-long maintenance shut down, car analysts said that auto sales would be affected owing to negative macro economic sentiments.
According to Sridhar Chandrasekhar, head of research at Crisil, a combination of price hikes announced by Indian OEMs and a spurt in fuel prices was beginning to pinch consumers. Auto analyst with Mumbai-based brokerage Prabhudas Lilladher Surjit Arora said he expected car sales to register single-digit growth this fiscal compared to SIAM?s high double digit growth forecast.
Partner at consultancy firm Tecnova, Alok Verma acknowledged that the market was experiencing downward pressure but added that in the longer run the market fundamentals in India were strong. He also said that owing to the government?s investments in infrastructure, it would have a spin-off benefit for the industry as well. Tata Motors was the worst hit in June with overall passenger vehicle sales falling nearly 21%.