Analysts Predict Diwali Disaster For Car Sales

Published: Tuesday, August 23, 2011, 13:31 [IST]

Indian carmakers who were jolted by a shocking drop in sales this July were hoping the festive season, which is the period that registers the highest amounts of sales during a year, would bring about a reversal in their fortunes. However market analysts have opined the auto industry will continue to be under pressure with sales expected to drop further as they expect the Reserve Bank of India to hike interest rates again this September.

Several major carmakers such as Maruti Suzuki, Honda and Tata who saw a steep drop in sales last month have launched new models and model updates to boost sales during the festive season. Honda launched the face-lifted Jazz earlier than expected only to capitalise on the festive season. Maruti Suzuki Kanwaljeet Singh had said during the launch of the new Swift that the carmaker was hoping its sales of models such as the Ritz and the A-Star would increase this September

It is a known fact that increasing lending rates triggered by the Reserve Bank of India (RBI)and increasing fuel prices have contributed to the drop in car sales. Carmakers also feel the consumer sentiment is also playing a vital role in the sales decline. Market analysts are of the opinion the RBI is most unlikely to loosen its tight monitory policy. They have also said sales could eventually drop to much lower levels.

Shamsher Dewan, the Senior analyst on automotive sector at Icra said: “ We don't expect any significant sales growth this festive season. The market has been dented by high fuel prices and interest rates. Any further rate hike will impact sales during the festive season."

PwC India Head (Automotive Practice) Abdul Majeed is quoted to have said: “The chances of another interest hike next month has dampened the prospects of the auto industry during the upcoming festive season. This comes at a time when the market is already reeling under pressure from high interest rates and rising fuel costs."

Car sales have plummeted to shocking levels this July with Maruti Suzuki, Tata Motors and Honda reporting steep drop in sales. Even luxury car sales which were previously insulated from market conditions saw a slowdown. Car buyers who intended to buy a car through a loan might postpone or call off a purchase. But if you happen to be someone with ready cash to buy yourself a car consider yourself as one of the saviours of the car industry in India.

Article Published On: Tuesday, August 23, 2011, 11:22 [IST]

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