Date:08/11/2008 URL: http://www.thehindu.com/2008/11/08/stories/2008110855931800.htm

Business

Auto industry faces slowdown

Sandeep Joshi

Sales fall on non-availability of finance and high interest rates

Companies rethink on their strategies
Fast track redressal mechanism needed

NEW DELHI: Steep decline in sales of passenger as well as commercial vehicles has left all the major auto manufacturers jittery.

The slump in demand for their products in both domestic and export markets for the past few months, due to the financial crisis, has forced them to rethink on their strategies, which include shutting their manufacturing facilities or curtailing production.

What aggravated the automobile manufacturers’ woes are poor sales even in October this year when major festivals such as Diwali, Durga Puja and Navratri were celebrated. Festive season is one period when companies clock highest sales every year and this momentum prolongs till the year-end.

But this year has been exceptionally bad for automobile companies as their sales have fallen beyond expectations.

Sales of almost all automobile players have been hit. Tata Motors’ sales declined by 20 per cent in October to 39,729 units with the commercial vehicle segment taking the biggest hit. Its exports also dipped by 16 per cent. Mahindra & Mahindra also reported a 17.81 per cent decline in total automotive sales in October, while that of Maruti Suzuki declined by 8 per cent.

Hyundai has also decided to curtail its export order for a few months. In the two-wheeler segment, Bajaj Auto reported a steep 34.01 per cent fall in its sales in October.

Expressing deep concern over the overall dismal scenario in the automobile sector, Society of Indian Automobile Manufacturers (SIAM) Director General Dilip Chenoy said non-availability of finance and high interest rates were the two major factors behind falling sales, particularly in the commercial vehicles segment.

“Unless the interest rates are brought down to single digit [level], situation will not improve. Companies need financial assistance. The automobile sector needs some fast track redressal mechanism. Though the government has infused some liquidity into the system, its impact has not been felt till now. More needs to be done on this front,” he added.

Similarly, the Automotive Components Manufacturers’ Association (ACMA) has demanded cut in import duty and increase in loan repayment period on automobile loans to help the industry tide over the current slump.

It has also asked the government to infuse more liquidity into the system and evolve special loan schemes for the auto-component industry at concessional rate of interest.