Auto India, Car India

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Crisil has indicated that the car sales have been slowest in the decade. This can be contributed to the frequent hike in the prices of the fuel and also the increase in the loan rates for cars. Crisil has predicted that this slump in demand of cars can further aggravate in India; a country where auto industry has been growing at a very fast pace in the recent years.

The research firm indicated that sales of indigenous cars can be as low as three percent by the end of the financial year March 2012. This is a sharp contrast to the previous prediction by the company, as eight to ten percent growth. At a time when the car sales were on a high of 30 percent, the company had predicted on September 20, 2011 that the growth of the car sales in the country would come down to eight to ten percent. Now, this prediction is down to three percent.

Although the industry body of Indian Manufacturers (SIAM) predicts the growth rate of the sales to be ten to twelve percent, it has also indicated that these figures might be modified. Crisil said that, “We have revised our forecasts downwards on account of a rise of 3 rupees in the petrol prices and a 25 basis points increase in interest rates. This would be only the second time in the decade when industry will grow at sub 5 per cent.”

Owing to the increase in the bank loans by the RBI, the sales of cars in India declined significantly. The main reason behind this is that the auto market in India is dominated by the middle class people, who rely on these loans to purchase a car. RBI had to increase the rates of the loans several times in the past eighteen months in order to balance the inflation.

Crisil remarked, “While automobile financiers have not fully passed on the increased rates to end users, uncertainty regarding their decision to pass on the rate hikes, coupled with the burden of EMIs (equated monthly installments) of other loans would impact demand for cars.”

Crisil has noted that the strike at Manesar should soon be resolved, as Maruti Suzuki contributes to almost half the production in the country, and subsequently to the auto industry. If the labor dispute continues, the growth of the industry might be “severely impacted”.