Domestic car sales rises 7.2% in Jan; annual car sales likely to drop: SIAM

Passenger cars have recorded a growth 7.2% in January 2012 as compared to the same month last year. Commercial vehicles grew by 13.52% and the growth figures for two wheelers stood at 13.63% in January 2012 as compared to January 2011. Three wheelers however, registered de-growth at (-) 3.49% in January, as per the data released by Society of Indian Automobile Manufacturers (SIAM).

Passenger cars saw the third consecutive monthly rise in this fiscal. Car sales had been registering a decline in sales since July 2011 after registering a 30% growth in the year ending March 2011. However, the growth in November-January is unlikely to make up for the losses suffered earlier unless sales grow in February-March at 10-12%. Since this is unlikely to happen, the auto industry will miss the sales projection for FY12. The industry had forecasted an increase in sales by 0-2% in FY12.

The overall sales growth rate recorded for April-January 2012 was 12.51%. Passenger vehicles segment recovered marginally at 1.45% during April-January 2012 over same period last year. Passenger cars recorded de-growth of (-) 1.19%, Utility Vehicles grew by 13.03% and Vans grew by 8.40% in this period. And growth in overall passenger vehicles was at 8.86% in the month of January 2012.

Indian car sales are mainly driven by a rapidly expanding middle class that is typically reliant on loans for purchases. This makes the car industry too sensitive to interest rates. Since interest rates are unlikely to come down in the near future, the car industry is not optimistic of meeting its forecasted growth. SIAM, however, expects vehicle sales to increase by 11-13% in the fiscal year starting on April 1, if the Reserve Bank of India begins to ease interest rates soon. The central bank had raised interest rates 13 times since March 2010 in its battle against stubborn inflation.

Growth in sales of commercial vehicles, seen as an indicator of economic activity, stood at 13.52% in January 2012 as compared to January 2011. The overall commercial vehicles segment registered growth of 18.63% during April-January 2012 as compared to the same period last year. Motorcycle sales, which have remained strong over the past year, rose by 10.51% last month. The increase is less than SIAM's growth rate forecast of 13-15% for the current fiscal year. During April-January 2012, motorcycles grew by 13.66%.

The cumulative production data for April-January 2012 shows overall production growth of 14.56% over same period last year. Production in January 2012 registered growth of 11.25% as compared to January 2011. On the export front, overall automobile exports registered a growth rate of 28.36% during April-January 2012. Passenger Vehicles registered growth at 20.64% in this period. Two Wheelers, Commercial Vehicles and Three Wheelers segments recorded growth of 28.52%, 27.60% and 39.70% respectively during April-January 2012. In January 2012 compared to January 2011, overall automobile exports registered a growth of 22.93%.