Demand for commercial vehicles is sure to bounce back, thanks to the various measures announced by the government specifically for the sector in the second stimulus package announced on Friday. Though there have been nothing specific for others sectors in the auto industry including the passenger cars, two-wheelers and the auto component industry, analysts feel that the package along with the RBI?s move will help boost the overall sentiments and this will eventually lead to increase in demand.
?The package addresses the overall sentiments of the consumers. If economic activity restarts following this package, it will lead to positive impact on the all sectors, including auto. Moreover the reduction in cash reserve ration, repo rate and the reverse repo rate will infuse more liquidity into the system which will translate into money in the hands of the end-users,? says Dilip Chneoy, director general, Society of Indian Automobile Manufacturers (Siam).
However, the industry experts feel that nothing has been done to ensure that it translates into lower interest rates for the sector. ?We welcome the positive steps announced in the fiscal package today. The government needs to work on ensuring that ultimately liquidity reaches customers at reasonable costs,? says Ravi Kant, managing director, Tata Motors.
Agrees Vishnu Mathur, executive director, Automotive Component Manufacturers? Association. ?Banks have completely put the auto component sector in negative list and are in no ways willing to increase their exposure to the sector. Since there have been no measures to ensure that the benefits of reduced interest rates would reach the component manufacturers, it is unlikely to help the sector to revive.?
?Since the demand for rebate on exports has not been addressed, exports of vehicles as well as component, huge part of which happens to developed economies like the US and Western Europe where recession has set in, the sector will continue to be in bad share at least for another one or more quarters,? adds Abdul Majeed, auto analyst and partner, Price Waterhouse.
According to Siam, passenger-car sales fell by around 19% in the domestic market at to 83,059 units in November vis-?-vis 1,03,031 during the corresponding month in 2007, while total two-wheeler sales declined by 14.7% at 5,67,502 units as compared to 6,65,181 units in November 2007.
The India automobile sector has been facing liquidity crunch for quite sometime. Despite series of reduction in rates by the RBI, not much has been done by auto financial institutions. In fact, there has been no significant reduction in interest rates over the last six months of 2008. Consequently, interest rates on cars are still hovering around 14-15% and industry experts feel that till this falls to 10-11%, not much improvement is expected on the auto finance side.