Auto India, Car India

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The car sales in the Indian market have suffered an all time low; this has been the worst ever sales figure in the past decade and shows that the Indian economy might be headed towards a slowdown.

According to the Society of Indian Automobile Manufacturers, the sales of domestic cars declined to 23.8 percent and the production dipped by about 28 percent. This drop can be said to be the worse ever since 2000, when the car sales dipped by 35 percent. The various policy makers are worried about the health of the economy of the country, because of the increasing inflation, slow interests and high interest rates; all these have discouraged the investors.

Moody’s, the well known rating agency has downgraded the banking system of India and said that the economic slump worldwide along with the domestic slowdown can lead to further decrease in the profits of the auto industry. A senior analyst at Moody’s, Vineet Gupta said that “India’s economic momentum is slowing because of high inflation, monetary tightening, and rapidly rising interest rates.”

The decline in the car sales can be contributed to some extend to the strike at Maruti Suzuki’s plant at Manesar, which extended for a long period. Maruti is the largest car maker in the country and hence the strike affected the whole industry. Various monetary policies of the country, constant hike in the fuel prices, and hike in the interest rates are some other factors responsible for the decrease in the sales of cars, say experts.

In an attempt to curb inflation, the Reserve Bank of India has increased the rates about thirteen times since March 2010. The trade deficit of Indian trade broadened to highest in the last 17 years to USD 19.6 billion last month. The exports fell drastically as the two countries that contribute to the sales are USA and the UK, and both of them are facing an economic slowdown.

India’s commerce secretary said that “It is clearly something to be very worried about. At this rate, our annual trade deficit could reach USD 150bn.”

The demand for the two wheelers also came down between March and August this year. Venu Shirnivas, the MD of TVS Scooty, observes that “There are definite signs of an early indication of a slowdown but the picture will become clearer once the sales numbers for November and December come in.” He added that “Although two-wheelers are not as impacted by interest rate hikes as cars because fewer numbers are bought with auto loans, inflation and the repeated hikes in petrol prices has hit demand sentiment.”

Although the figures are not very encouraging, the sales of the tractors are expected to increase by about 15 percent. According to Mahindra, the sales of the tractors have been very good over the past three years.