Passenger vehicles sales in the domestic market declined for the first time in 12 years recording a drop of 6.05% last financial year despite the cuts in excise duty announced by the government in the interim budget. Sales in the passenger vehicle segment had previously declined by 5.87% in 2000-01.
High interest rates, rising fuel prices and uncertain economic conditions, in fact, sharply depressed demand for both passenger and commercial vehicles forcing car makers to slash production by around 5% last year and leading to an estimated loss of around 150,000 jobs across the entire supply chain.
Vikram Kirloskar, president, Society of Indian Automobile Manufacturers (SIAM), said, "Last year was one of the most difficult years for the industry. The business environment was tough due to low growth of economy, high interest rates, fuel prices and low sentiments." He added the decline in sales of automobile hit hard employment prospects in the industry, mainly of temporary and contractual employees. "We have not done a calculation of how many job were lost, but I personally feel that across the entire value chain in the auto industry, from raw material suppliers to dealerships, there could be around 100,000-150,000 joblosses," Kirloskar said.
According to data released by SIAM, sales of passenger cars dropped for the second consecutive year, by 4.65% to 1,786,899 units. In the 2012-13, car sales in India fell by6.69%, which was the first decline in a decade. The commercial vehiclesegment fared no better, registering a decline of 20.23% at 632,738units. Vishnu Mathur, director general, SIAM said, "The commercial vehicle segment has seen sales decline continuously for over two years now. Thestalling of infrastructure development projects, ban in mining activities andoverall slowdown in the economy has sharply affected demand. It will recoververy gradually." During the fiscal, total sales of vehicles across categories, however, were up 3.53% at 18,421,538 units as compared to 17,793,701 units in2012-13. Volumes grew on back of strong demand for two-wheelers, particularly scooters.
Overall, sales of two-wheelers increased by 7.31% to14,805,481 units. While demand for motorcycles grew by 3.91% to10,479,817 units, those of scooters went up by 23.24% to 3,602,744 units. In the current financial year, Kirloskar said the industry was "hoping for a moderate growth or at least not to be in the negative territory", provided that the new government leaves excise duty rates unchanged. Abdul Majeed, auto expert and partner, Price Waterhouse Coopers said, "The Indian Economy is expected to make a comeback after the much needed push some of the policy reforms are expected to get in the next one year. The sector is expected to bounce back to its growth momentum either in the last quarter of 2014 or most probably by first quarter of2015. While there may not be a strong growth, the sector could witness a growth of 3 to 5% for the current fiscal year i.e FY15. Medium to Longterm growth prospects of the industry i.e 2016 - 2020 continue to be bright."
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