Auto industry inches ahead on stimulus push

Amid the economic crisis, the Indian auto industry managed to stay positive as the market grew 0.7% to 97.2 lakh units in FY09 with the government’s stimulus package coming as the biggest booster. Auto companies are looking at a flat growth in the first few months of the current fiscal with good numbers coming from passenger vehicle and two-wheelers, but commercial vehicles are likely to play spoilsport. After six years of robust growth, car sales grew marginally last fiscal against 12% (12.03 lakh units) in the previous fiscal. Cars are expected to grow 5% in the current fiscal on the back of robust demand for the world’s cheapest car Nano, Society of Indian Automobile Manufacturers (SIAM) has predicted. Analyst tracking the sector said that subdued demand will remain a challenge for the automobile industry in the next few months. “The worst for the automobile industry may be over, but concerns are still there. The growth has come back due to the government’s initiatives. Easy vehicle financing and improvement in consumer sentiments could drive moderate single digit growth in FY10,” Sachin Mathur, head, CRISIL Research, said. In FY09, total passenger vehicle sales, including SUVs and utility vehicles, posted flat a growth of 0.1% (15.51 lakh units) with multi-utility vehicles, such as Maruti Versa, Omni and Tata Motors’ ACE Magic, growing 6% (106,607 units). Major carmakers, such as Maruti Suzuki, grew 2% to 7.22 lakh cars and Hyundai Motor India gained 13% to 2.44 lakh units. However, six of the13 car makers, led by Renault SA, Ford Motors, Honda Siel Cars and General Motors reported lower sales in the last fiscal due to the slowdown. According to SIAM, the domestic auto industry’s growth in this fiscal could be subdued, unless the government notifies fresh stimulus package to create demand. The government had cut excise duty by 4% on all vehicles and reduced excise duty to 8% from 10% on commercial vehicles and auto parts. “Even as the economy cooled and the credit crunch dampened demand, a series of government initiatives helped the auto industry stay in the positive zone. Top concerns are liquidity, working capital finance and high interest rates,” SIAM director general Dilip Chenoy said.