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K. Giriprakash
Manu P. Toms

Bangalore/Mumbai, Nov. 12 With inventory levels in car dealerships across the country doubling in recent months, the Indian auto industry may be facing a far more serious situation than was expected earlier.

Car makers across the country have started cutting down on growth forecast and now it is expected that the total growth rate may be 7-8 per cent compared with about 12 per cent last fiscal.

A member with the Federation of Automobile Dealers’ Association (FADA) told Business Line the inventory levels have doubled to 60 days during the last few months. In south India, sales have reduced by as much as 40 per cent, another FADA member said.

During a recent interaction with the media in Chennai, Hyundai Motor India’s Managing Director, Mr H.S. Lheem, said that the company’s dealers had less than a month’s stocks, while the company itself had about 22,000 units with itself, which was less than a month’s production.

Sources in Maruti Suzuki, India’s largest car maker, said because of the high inventory levels, huge discounts were offered to customers, which reduced the levels by about 7,000-8,000 cars in October.

The Vice-President of General Motors India, Mr P. Balendran, admitted that the growth rate might be half of what it was last fiscal but pointed out that current sales are more because of new launches.

Maruti Suzuki has, in fact, decided to stick to its earlier scheduled launch of its 1-litre A-Star, which will be launched around November 20. However, Hyundai is learnt to have put off the launch of i20 to sometime early next year though it has started exporting the model.

Car makers such as Hyundai, General Motors and Ford have cut their growth forecast. Hyundai has scaled down its sales target for 2008 from about 6 lakh to slightly over 5 lakh while export growth rate is expected to go down by 25 per cent. General Motors said that it will sell about 10,000 cars less this year compared with 90,000 cars last year. Ford also expects to sell 10 per cent less cars this year.

Mr Thomas Kuehl, Board Member (Sales & Marketing), Skoda Auto, said global financial crisis has affected India too.

“I don’t think it is a long-term thing. But we are feeling it now. Interest rate is high and banks are very conservative in giving loans. There is something that is keeping business little bit on the lower side. And we have to see when the cycle again starts. But it is very difficult to predict.”

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