SIAM Cuts Sales Forecast Cit­ing Pol­icy Un­cer­tain­ties

Mar­ket now ex­pected to ex­pand 6-8% this fis­cal, slower than 11-12% forecast ear­lier

The Economic Times - - Companies - Our Bu­reau

New Delhi: In­dia’s top au­to­mo­bile in­dus­try body on Fri­day cut its forecast on pas­sen­ger ve­hi­cle sales for the fis­cal year that just started, blam­ing pol­icy un­cer­tain­ties for cre­at­ing a chal­leng­ing mar­ket en­vi­ron­ment.

The So­ci­ety of In­dian Au­to­mo­bile Man­u­fac­tur­ers re­leased the out­look af­ter an­nounc­ing a 7.24% in­crease in the sales of cars, util­ity ve­hi­cles and vans for the last fis­cal year ended on March 31. The growth was the fastest in five years, but SIAM said it was boosted by deep dis­counts and de­mand for new mod­els, even as the mar­ket re­mained slug­gish.

It now ex­pects the mar­ket to ex­pand 6-8% this fis­cal, slower than the 11-12% forecast three months ago. March num­bers in­di­cated the in­dus­try’s prob­lems, as car sales fell 0.3%. Strong de­mand for util­ity ve­hi­cles, how­ever, aided to­tal pas­sen­ger ve­hi­cle sales to climb 5.13% in the past month from a year ear­lier. Con­sumer sen­ti­ment re­mained weak due to high in­ter­est rates and un­cer­tain­ties over diesel cars on ac­count of ad-hoc poli­cies, SIAM deputy di­rec­tor-gen­eral Su­gato Sen said. Court ac­tions, such as the ban on large diesel ve­hi­cles in the Na­tional Cap­i­tal Re­gion, fur­ther com­pli­cated the mat­ters. In­tro­duc­tion of an in­fra­struc­ture Cess in the lat­est bud­get was another wor­ri­some point.

“The sec­tor is the high­est taxed in the man­u­fac­tur­ing sec­tor ... There is only 60% ca­pac­ity util­i­sa­tion in the auto in­dus­try to­day … prof­itabil­ity of many car com­pa­nies is still in the neg­a­tive to­day in In­dia,” he said.

Sales of com­mer­cial ve­hi­cles rose 11.51% in FY16, in­di­cat­ing im­pro- ving eco­nomic ac­tiv­ity, while twowheeler vol­ume in­creased 3.01%, with a re­cov­ery in mo­tor­cy­cle num­bers in March aid­ing the growth. Ve­hi­cle sales across cat­e­gories rose 3.78% to nearly 20.5 mil­lion in FY16.

Man­u­fac­tur­ers dis­patched about 2.79 mil­lion pas­sen­ger ve­hi­cles from fac­to­ries in the past fis­cal year. The last time sales rose faster was in 2010-11, when the growth was 28.20%.

“The growth last fis­cal was mainly be­cause com­pa­nies have tried to come up with new mod­els, which have been ac­cepted in the mar­ket,” SIAM’s Sen said, re­fer­ring to the pickup in pas­sen­ger ve­hi­cle sales.

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