Indian car market slumps

11 April 2013

MUMBAI: Car sales in India fell by 22.5% in March 2013 on an annual basis due to "larger problems in the economy", the Society of Indian Automobile Manufacturers (SIAM) has revealed.

Confirming that it had been a poor year, S. Sandilya, SIAM president, expressed cautious hopes for the coming year. "The year has been bad and that's visible. Any factor that impacts consumer buying behaviour has not been positive," he said.


"But whatever has happened is due to larger problems in the economy. There have been policy changes and we are hopeful that they will be executed in time."

SIAM said it expected growth of between 3% and 5% in 2013-14, but some observers questioned this, noting that the society had started 2012-13 forecasting 10% growth.

"The reduction in total industry volumes we have seen – this I don't think was expected at all," Tomas Ernberg, managing director of Volvo in India, told the Financial Times. "It is going down really, really fast compared to what people were expecting … I think it [the market] now faces a bit of a crisis."

Analysts indicated that foreign automakers may delay further investments and to shift focus away from the domestic market.

"One big shift you will see is the use of India as an export manufacturing base, which we have seen with the likes of Ford and Nissan, and now others will go down that path," said Rakesh Batra, head of automotive at Ernst & Young in India

Batra was speaking on the same day Yamaha, the Japanese manufacturer, announced it would make India a hub for the production and export of low-cost motorcycles and scooters to China, Africa and Latin America.

Despite the gloom, there were optimistic voices. "This is the depth of the down cycle, and we expect things to get better at the end of this year," said Siddhartha Lal, chief executive of Eicher Motors, a commercial vehicle group.

Data sourced from Financial Times, Livemint, Times of India; additional content by Warc staff