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Indian car sales will bounce back in 2012

By Motortrend India Staff   |   27 December,2011

Reversing the declining trend of the recent months, car sales are likely to bounce back as inflation and interest rates are expected to come down in 2012, according to research firm Deloitte.

Passenger car sales have fallen in the past few months due to various poor macroeconomic factors such as restrained growth of real disposable income, high interest rates and rising fuel prices, said the Deloitte report, ‘Driving Through BRIC markets -- Lessons for Indian car manufacturers’.

“Car sales have declined, registering de-growth since July 2011, compared with the previous year and is not expected to recover unless the macroeconomic factors become attractive. In FY 2011-12, car sales are expected to grow by a meager 2-3 per cent against 30 per cent in 2010,” it added. The report pointed out that fuel prices have increased by up to 34 per cent since deregulation in 2010.

Besides, persistent inflationary pressures have resulted in continuous rise in lending rates by banks and they are around 13-14 per cent for new car loans. Deloitte said India has very low penetration of cars and hence sales are bound grow in future.

“The current slowdown is not here to stay as the fundamentals of car sales growth namely, urbanization and car density are still very attractive,” Deloitte India Senior Director Kumar Kandaswami said.

The Reserve Bank expects inflation to moderate to 7 per cent in 2012, and the moderating of interest rates shall once again make conditions attractive for automakers, the report said. Besides, the country is likely to witness “most postponed purchases being executed as conditions become favorable”, it added.

The study said the top four firms, Maruti Suzuki, Hyundai Motor, Tata Motors and Mahindra & Mahindra, constitute 80 per cent of the passenger car sales, thereby making it a highly concentrated market.

“However, increasing competition across vehicle segment is expected to lower the concentration levels. New players are quickly gaining market share and it is expected that the passenger car market will have five or more players making up for 80 per cent of the market in the upcoming years,” it added.

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