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India second fastest growing auto market after China

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Domestic sales register 26% rise in 2009-10.

Our Bureau

New Delhi, April 9

Riding on the Government's stimulus package and easy finance rates, the automobile industry in 2009-10 recorded a 26 per cent growth in domestic sales.

The strong sales have made India the second fastest growing market after China (42 per cent), followed by Germany (23 per cent). Industry officials, however, warned that the growth may ease in the current fiscal.

LCV segment

“The industry has grown really well in 2009-10, but on a lower base of 2008-09. While the light commercial vehicles (LCVs) segment has done well, the medium and heavy commercial vehicles (M&HCV) segment has not yet reached the 2007-08 levels,” said Dr Pawan Goenka, President, Society of Indian Automobile Manufacturers (SIAM).

He added that the implementation of the sixth pay commission and various new model launches also drove sales.

SIAM officials said that the growth posted in the year was the biggest percentage rise in seven years. The industry had posted a 29 per cent growth in 2003-04.

Commenting on the outlook for 2010-11, Dr Goenka said that the strong growth may not be maintained in the present fiscal - though it should be in double digits.

“Overall the industry is in good shape and we are positive about the fiscal. However, the growth may be subdued because of a combination of four reasons - the excise hike, new emission norms, rising commodity prices and a possible hike in the interest rates. This may lead to an average hike in prices by 8-10 per cent. The desired industry growth rate is 16-17 per cent, though it is expected to be at 10-14 per cent. With many launches planned for the fiscal, the LCV segment will see the highest growth,” he said.

When asked about the effects of an interest rate hike, Dr Goenka said, “The interest rates will go up in the medium-term. A 50 basis point increase will not have a huge impact, but a 100 bps increase may have an impact on sales.”

Annual sales trend

While passenger car sales grew 25 per cent in the previous fiscal at 1,526,787 units, the overall passenger vehicle segment - including the utility vehicles and multi-purpose vehicles - also posted a similar 26 per cent growth.

Segment market leader Maruti Suzuki's sales during the last fiscal jumped 21 per cent, while Hyundai Motor followed with a 29 per cent sales growth and Tata Motors' sales rose 24 per cent.

Commercial vehicle (CV) sales grew 38 per cent, after a sharp drop in 2008-09. Within the segment, LCV posted a 43 per cent growth, while the M&HCV segment grew 34 per cent. Within CVs, market leader Tata Motors' sales rose 38 per cent, while Ashok Leyland's sales grew 22 per cent. Boosted by strong LCV sales Mahindra & Mahindra posted a 53 per cent increase, while Volvo-Eicher sales also grew 54 per cent.

Meanwhile, both the two-wheeler and three-wheeler segments sales grew 26 per cent. Individually, motorcycles grew 26 per cent, while the scooter sub-segment grew 27 per cent. Sales of electric two wheelers, however, dropped by 89 per cent. For India's largest two wheeler company - Hero Honda, sales rose by 24 per cent. Bajaj Auto's sales climbed by 39 per cent and that of TVS Motors increased 19 per cent.

March sales

Domestic vehicles sales in March grew 37 per cent overall, with the two-wheeler and commercial vehicle segments recording the highest percentage growth – at 41 per cent and 61 per cent respectively.

Passenger vehicle sales grew 21 per cent in the month, while passenger car sales grew 20 per cent.

Officials said that March sales have not been as strong as in January and February, which were both record breaking for most segments.

Exports

Aided by strong demand of cars due to the scrappage incentives announced in Europe, exports in the 2009-10 fiscal grew 18 per cent, while rising 40 per cent in March.

“Going forward, the exports scenario looks a bit difficult. There are too many things that are not under our control,” said Dr Goenka.

(This article was published in the Business Line print edition dated April 10, 2010)

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