Car sales did not take off on a cheerful note in the New Year with January sales dropping 0.72 per cent year-on-year (YoY) to 1,68,303 units, compared with 1,69,527 units in the corresponding month in 2015 – the first decline after 14 straight months of growth, as per the Society of Indian Automobile Manufacturers (SIAM).

“Growth declined as people advanced their buying to December due to record discounts offered by the companies. Also, there was correction at the inventory level during the month,” Vishnu Mathur, Director General, SIAM, said on Friday.

However, Mathur said that the dip in passenger car sales was a “temporary hiccup”.

Going forward, he said the overall passenger vehicle sales would grow in the range of 8-12 per cent and in the current financial year, the industry body expects to grow by six-eight per cent.

“Till January, we have grown by eight per cent,” he added.

Hoping for some let-off in rural distress, Mathur said: “Even though sales in rural areas are down, we have been able to grow by eight per cent this fiscal. So, if the rural markets are back in the next fiscal, we expect better growth in FY17.” SIAM said motorcycle sales were also improving, though with a lower margin, with sales of 8,68,505 units in January, against 8,72,325 units in January 2015.

The scooter segment grew eight per cent YoY to 4,04,919 units in January compared with 4,36,707 units in January last year. However, the commercial vehicles segment maintained double-digit growth during the month.

For instance, the medium and heavy vehicles segment grew by more than 33 per cent to 28,533 units compared to 21,363 units in January 2015.

Rural demand Analysts said rural demand is critical for sustainable growth in the auto industry, adding that they expect the upcoming Budget to include some revival plans.

Abdul Majeed, Partner, Price Waterhouse, said: “Hopefully, the upcoming Budget will address the issue and revive rural demand by focussing on infrastructure, agricultural and stimulating overall investment activity in the economy. In addition, low fuel prices, incentive for replacing old vehicles, reduction in the interest rates as well as increase in personal disposable income for certain section of customers (i.e. Seventh Pay Commission increase) will help the auto industry grow better in 2016-2017."

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