Car companies to sell 1-3% less vehicles

Cutting car sales projection for the ongoing fiscal for the second time because of demand slump, SIAM said on Wednesday the auto industry will miss its ambitious target of clocking an annual turnover of $145 billion by 2016 under the Automotive Mission Plan.

Society of Indian Automobile Manufacturers lowered car sales growth projection to just 1-3 per cent for this fiscal from the 9-11 per cent announced in July.

With no signs of a 'significant' growth in the next 3-4 years, SIAM also said the AMP target of annual turnover of $145 billion by 2016 will be missed by around 20-25 per cent at the current rate of growth of the industry.

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"Considering the low growth that we have seen in the second quarter of this fiscal and the overall macro-economic situation, we feel the car sales will grow around 1-3 per cent this fiscal," SIAM president S Sandilya told reporters in New Delhi.

If the car sales grow at this rate, then it will be the slowest since 2008-09, when it grew by just 0.18 per cent, he added.

In the second quarter of this fiscal, passenger vehicle sales, including cars, grew by just 4 per cent at 6,18,000 units as against 5,93,000 units in the year-ago period.

This is the second time SIAM has lowered the growth projection of car sales since it first forecast a growth of 10-12 per cent for 2012-13 in April this year.

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He said the overall economic situation of the country, low sentiments, high petrol prices and interest rates are among the factors hurting the overall sales of the auto industry.

"Even we don't expect to have a good festive season this time around," he added.

Overall, the auto industry's sales will grow by 5-7 per cent, much lower than the earlier estimate of 11-13 per cent for this fiscal, Sandilya said.

"If this current trend continues, then we will miss the AMP target of achieving an annual turnover of $145 billion from auto and auto-component manufacturers by 2016," he said.

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The shortfall will be $34-35 billion and the industry would need to grow at a minimum of 16-18 per cent in the next three to four years to achieve it, he said, adding "it is very unlikely that we will grow at that rate and we have missed the bus".

Sandilya said SIAM has already approached the government to extend the tenure of the AMP by another 10 years in the wake of the development.

"We have communicated to the government that we will miss the targets but we have not given specific targets if the mission plan period is extended to 2026," he said.

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SIAM has also revised downward growth projections for other segments this fiscal. Passengers vehicles sales, which include cars and utility vehicles, have been pegged to grow by 8-10 per cent as against an earlier estimate of 11-13 per cent.

It has, however, said that the utility vehicles segment, which has seen a jump in sales due to launch of price attractive models, will grow by 50-52 per cent as against 29-31 per cent projected before.

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Two-wheelers are estimated to grow at a much lower rate of 5-7 per cent this fiscal, as against an earlier projection of 11-13 per cent, SIAM said, adding the softening of rural demand and sustained cautious urban sentiments are affecting sales in the segment.

The commercial vehicles segment is also forecast to grow at a lower rate of 3-5 per cent as against the earlier projection of 6-8 per cent.

SIAM said the sales of medium and heavy commercial vehicles in goods carrier segment will decline by 11-13 per cent from the earlier estimate of a decrease in sales by 6-8 per cent.

The industry body has, however, kept the growth forecast for the three-wheeler segment at 0-2 per cent.       

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Commenting on the overall outlook, Sandilya said: "The industry would need to watch interest rates, fuel prices and commodity prices carefully along with government policy initiatives which may undermine benefits".

He said 'to further nurture the sector to extract full potential benefit for the economy in terms of contribution to GDP, value addition and employment, SIAM has asked government to look into the possibility of extending AMP till 2026.