Indian car sales down as economy slowsYearly car sales in India have dropped for the first time in ten years, reflecting an overall slowdown in this once booming economy. Figures for the 12 months to March 31st this year show that sales of new cars in India were down 6.7%, according to a report from the Society of Indian Automobile Manufacturers (SIAM).
Yearly car sales in India have dropped for the first time in ten years, reflecting an overall slowdown in this once booming economy. Figures for the 12 months to March 31st this year show that sales of new cars in India were down 6.7%, according to a report from the Society of Indian Automobile Manufacturers (SIAM). This motoring organisation clearly got their sums completely wrong, having previously predicted an increase of up to 12% for the same period. SIAM blamed a downturn in the economy and high interest rates for what was, for them, an unexpected decline.
SIAM deputy director general, Sugato Sen, commented: "These figures have disappointed all our earlier forecasts, there has been a reversal in buying behaviour". SIAM revealed that total car sales for the period were 1.89 million units compared to 2.03 million units for the previous 12 months. Industry analysts predicted that sales were unlikely to bounce back until the cost of borrowing was reduced and the wider economy begins to recover. Senior vice president of Hyundai Motor's India unit, Rakesh Srivastava, added: "In the absence of any positive stimulus and sentiments we foresee the pressure on volumes to continue until there is significant improvement in macroeconomic factors."
Less than a decade ago India was reported to be one of the fastest growing car markets in the world, with annual sales growth topping 30%. Analysts during this period agreed that new car sales in India would top 9 million by 2020. Clearly the outlook for India's car market has changed beyond all recognition since then and that decline mirrors problems in the wider Indian economy. During the period from March 2010 and October 2011, for example, the Reserve Bank of India (RBI) which is equivalent to the UK Bank of England, raised interest rates 13 times. RBI has since reduced interest rates three times but the cost of borrowing is still high in international terms at 7.75%.
India's economic growth has slowed during this period and this has had the effect of damaging consumer confidence and reducing demand. The Indian economy is predicted to have grown by 5% in the last year, its slowest rate of growth for more than 10 years. Taking these factors into account, the Indian car industry is much less bullish about previous predictions of growth. Mr RC Bhargava, who is chairman of India's largest car manufacturer, Maruti Suzuki, confirmed: "I don't think those goals are going to happen in that time frame. Things have changed a lot."
Posted by Edwin Miles on