Increasing interest rates coupled with fuel price hikes and increased input costs can dampen the Indian automobile sector. The growth rate is likely to slow down to 14-15 per cent in 2011 as compared to 31 per cent in 2010, a top industry official has said. In 2009, the industry had grown at 23-24 per cent even as the world was suffering from economic slowdown.
“High input costs and rising fuel prices coupled with a steady hike in interest rates would affect sales this year for the overall industry. However, we (GM) don’t expect any contraction,” General Motors India Vice-President, Corporate Affairs, A Balendran said.
General Motors registered sales growth of 6 per cent in January this year to 9,984 units from 9,421 units in the same month of the previous year. The company is expecting it to be similar in February too.
“Market sentiment is very low at this point. There are issues like the economic slowdown, (tight) liquidity and inflation. These are not very good signs for the auto industry. It would make the products costlier.”
Crude oil prices have reached $ 100 per barrel thus making petrol more expensive, Balendran said. Maruti Suzuki India recently said that it is expecting a drop in car sales in FY 12 driven by factors like high inflation, rate hikes and high fuel prices.
“Things like high inflation, the rate hikes and the fuel price increase point out to a tightening in the situation ...we need to be wary and careful as the buoyancy we saw till now will definitely slow down a bit,” Maruti Suzuki Chief General Manager, Marketing, Shashank Srivastava had said early this month.