Car dispatches slowest in 11 years, a third of auto facilities lie idle

At least a third of the car manufacturing capacity in India has been lying idle so far this fiscal as the country witnesses an unprecedented sales slump.

According to data released by the Society of Indian Automobile Manufacturers (SIAM) today, car dispatches to dealerships were lower between April and September this year than even the gloom period just after the collapse of Lehman Brothers in 2008-09. In fact, car dispatches have been the slowest since 2002-03 this fiscal or the slowest in 11 years.

[caption id=“attachment_1103227” align=“alignright” width=“380”]  Reuters[/caption]

SIAM President Vikram Kirloskar says consistently high vehicle finance rates, a slowing economy and the absence of any fiscal stimulus specific to the automobile industry despite repeated requests makes it difficult to predict if the remaining six months of 2013-14 will be any better.

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Though dispatches have improved across most vehicle categories in September, this could partly be because of manufacturers stocking dealerships in anticipation of higher offtake. A good monsoon this year means vehicle sales in rural areas are expected to be robust and sales of two wheelers are already in positive territory. But this is small comfort to an industry which is reeling an unprecedented slowdown.

Last month, vehicle makers sold 156,018 cars, up 0.7% from a year earlier. Sales of motorcycles rose 17.4% to 885,117 units but truck and bus sales were down 27% at 51,680 units. For the six month period, car sales fell 4.7%. A surprise increase in interest rates and rising car prices last month have tempered hopes for a turnaround in the country’s struggling auto sector.

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The association last month said car sales were likely to be negative in the current financial year that ends in March 2014 after earlier forecasting growth of 3-5 percent.

Among the vehicle segments which have seen the sharpest decline this fiscal are commercial vehicles and Utility Vehicles. CVs posted the second sharpest decline in 38 straight months in September, led by the large trucks and tippers or the M&HCV segment. Kirloskar pointed out that the decline was largely because of two-year fall in mining activity of iron ore and a near absence of coal mining across the country. These large vehicles are used mostly in the mining segment and Kirloskar said truck owners have been unable to repay loans on their vehicles because of a mining bans.

In UVs, the situation has been turned on its head by the Government’s selective increase in excise duty this fiscal. This, coupled with a sustained increased in diesel prices (SUVs are primarily diesel vehicles) has turned this segment from the fastest growing to one of the slowest in a span of six months.