Indian auto industry revs up for good times…

car-marutiWith the business-friendly Narendra Modi in the driving seat, India’s automobile sector looks set to shift gears and pick up speed in the days to come. It may be early days, but the enthusiasm among top auto titans is palpable.

After two years of negative growth, this summer promises to bring a blessed respite for the flagging Indian auto industry, the sixth largest in the world. The fortunes change fast; in April, the sentiment was that of gloom in the auto sector, but come May and one could see a perceptible upswing.  The automobile sector showed some signs of revival as domestic car sales rose by 3.08% and motorcycles grew by 11.71% in May. Domestic sales of India’s largest car maker Maruti Suzuki rose 16.4% in May. Nissan saw its domestic sales double, primarily riding on the success of its Terrano and Datsun Go models. Nissan was primarily seeing India as a facility to aid its exports worldwide, but it will now probably scale up its ambitions.  Ford India sales jumped by about 51.24 %.

Modi Power

modi-nanoWhat accounts for this turnaround in the making? It may be clichéd, but it’s the M word. A new strong and stable government at the centre, led by Narendra Modi, a business-friendly prime minister, has lifted up the spirits, with the auto industry revving up for better times. It’s premature to nurse irrational exuberance, but latest projections suggest that car sales are expected to rise marginally this financial year after seeing decline for the last two years. A weak monsoon may yet play the spoiler, but the auto majors are keeping their fingers crossed.

The Indian auto industry started the year 2014-15 with declining sales in most segments. As against 2013, the growth in year 2014 registered an increase of 10.35 %, mainly on account of a spike in the two wheeler sales.  According to Society of Indian Automobile Manufacturers (SIAM),the sales of passenger cars declined by 9.5%. The sales of cars and vans declined by 10.15 percent and 27.04 percent respectively while the sales of utility vehicles grew marginally by 0.27 %. The commercial vehicle segment too registered a negative growth of 24 % while medium and heavy vehicles also registered a negative growth rate of 17.09. The sales of light commercial vehicle dropped by 27.37. The overall exports grew by 12.98 percent on account of positive growth in the export of   commercial vehicles and two-wheelers

All eyes on Budget

Tcar-jaitleyhe signs of rebound are to be welcomed. For now, the auto industry is closely watching the contours of the first budget to be presented by the Modi government that could hold some clues to their future. The industry has high hopes from Finance Minister Arun Jaitley. An extension of excise duty cuts tops their wish list.

A delegation of Society of Indian Automobile Manufacturers (SIAM), led by its president Vikram Kirloskar, has already met ministers of commerce and industry, environment and heavy Industries, apprising them of key issues that’s plaguing the troubled sector. They sought support from the new government on a raft of issues, including the continuation of reduced excise duty on vehicles, enhanced export incentives for vehicles and new foreign trade policy to provide an impetus for growth.

The excise on small cars, commercial vehicles and two wheelers was cut to 8 percent from 12 percent earlier in the interim budget. The SUV segment saw a cut from 30 % to 24% and the luxury car segment saw it dip from 27% to 24%.


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