A significant shift has been observed in the Indian automobile industry and its sales scenario.  As per last month’s sales records, the automobile industry has been witnessing unexpected growth in its sales numbers since last month. With low borrowing rates, newer models of cars being introduced and the onset of the festival season in India, there have been record sales all across the country. This has increased the demands from some of the most famous automobile manufacturers in the country like Maruti Suzuki, Ford India, Hyundai and Tata Motors.

However despite the growing sales within the country the exports have fallen by 7 percents, as all auto manufacturers are gearing up to meet the rising demand in the country, especially with the onset of the festive season. The Society of Indian automobile Manufacturers have released the numbers that in August the total car exports from India stood at just 37,952 units when compared to 40,901 units, last time this year. This is also coupled with the low demand of cars especially in the European markets and with companies like MSIL and Hyundai looking for new shores to market their products.

Another issue is that due to capacity crunches, companies like Volkswagen, Maruti and Ford are not able to meet the demands for their popular vehicles on time. In order to produce an additional 250,000 units, Maruti has already announced plans to build a new production plan at Manesar, which will help the automobile manufacturer, meet the growing demand in the Indian market. In order to meet the growing demand, Ford has also started another shift in its Chennai plant owning to the increase of its small car Figo’s sales numbers. The Small car just crossed the 40,000 mark. However Volkswagen has not planned any changes in its production plan to meet the rising demand as yet.

The month of August saw a 7. 21 percent dip in the passenger car export figures as the automobile manufacturers were busy concentrating on the domestic market due to the increased demand in the Indian market. The demand in the international markets was yet to pick up according to SIAM, Society of Indian Automobile Manufacturers.
The export number in august ere 37,952units as against the automobile export numbers of 40,901 lat year in the same month.

Society of Indian Automobile Manufacturers, Director General Vishnu Mathur has said “The decline in export is understandable, as companies have decided to focus on meeting the domestic demand”.

When compared to 1,20,681 units sold late year in august, the domestic car sales this year was at 1,60,794 units with a 33.24 percent growth. “Moreover, the export markets are still not yet buoyant,” Mathur added.

Hyundai Motor India, India’s largest automobile exporter has declared a decline in overseas shipment of cars, which has been the main reason for the dip in the export figures. Hyundai Motors declared a dip of 12.28 percent with the numbers decreasing form 25,120 units last year in august to 22,035 units this year.

SIAM has also said that Maruti Suzuki India has also witnessed a decline in their export figures from 14,672 units in august last year to 11,972 units this year with a decline of 18.4 percent.

Nissan Motor India has confirmed a sale of 1,469 units of their hatchback Micra in the overseas market in august. The car is being manufactured in their Chennai plant from this year.

However, not all companies have reported a dip in their export numbers. Ford India has registered a huge leap in exports from 105 units last year in August to 983 during this year in August registering a nine fold increase.
However two wheeler exports continued to be on the rise even though there was a decline in the passenger auto exports.

The total two wheeler exports on India grew from 89,856 units last year this time to 1,25,057 units this year registering a 39.17 percent growth, according to the SIAM data.

There has been a huge rise in the motorcycle exports also from 87,405 units in august last year to 1,20,275 units this year thus showing a growth of 37.61 percent. Exports of scooters too showed an increase from 2,196 units last year in August to 4.440 units this year in August this registering a 102.19 per cent growth.

Even three wheelers have reported excellent export numbers from 14,677 units last year to 21,492 units this year showing a 46.43 percent growth in sales.

Most Industry officials have confirmed that if the Reserve bank of India increases the policy rates this month in an attempt ot control inflation, it will not affect the automobile sales drastically. This will be a minor speed breaker in the rising demand for automobiles in India. The centerpiece of RBI’s mid quarter policy review to be held on September 16th is expected to be the policy rate hike by 25 basis points. Following this hike, most banks are expected to increase their car loans rates.

However this rate increase is not a major concern for most auto makers. The Chief Financial Officer of Tata Motors, C Ramakrishnan has commented that his small increase in the rates will mostly be absorbed by the customers. HS Goindi, president marketing, TVS Motor has also commented, sharing the optimism of C Ramakrishanan that “Even if banks increase their interest rates in the months ahead, sales growth is unlikely to be affected”.

The automobile sales in India have been on the rise this financial year backed by the economic growth that has helped maintain the demand. Another factor that has helped the sales figures look high is the low sales figures of the previous year. 1.24 million Vehicles were sold in the month of July which is 32% higher than what it was last year. Vaishali Jajoo, analyst at Angel Broking has commented “Right now, the economy has started to pick up and demand is buoyant for the automobile sector, “She has also agreed that the demand may not decrease sharply after the hike in the interest rates. She also added “It seems there won’t be any big impact if there is a rate hike of around 25 basis points”.

The Indian economy witnessed a growth of 8.8% when compared to last year’s growth of 6.02% in the first quarter of the fiscal year. Robust manufacturing and services output have contributed to the higher growth.

India’s largest car manufacturer Maruti Suzuki is all set to increase India’s production capacity by 46% given the increasing demand in the Indian market, which is Asia’s third largest car market.

Once the new plant near Manesar is ready, Maruti Suzuki can manufacture close to 1.75 million vehicles per year as opposed to its current production capacity of 1.2 million vehicles per year. This was confirmed by Osamu Suzuki, chairman and chief executive officer of parent Suzuki Motor Corp.

Suzuki has confirmed that the car manufacturer plans to spend $416 million to build the plant and cash in on the growing demand for cars in the Indian economy. Other car manufacturers, Volkswagen AG and Ford Motor co are also building plants and are in the process of introducing newer models of cars in India in a bid to increase their market share.

Umesh Karne, a Mumbai-based analyst at BRICS Securities Ltd. said “It will be good for the company if they can ramp up capacity as soon as possible, if they don’t expand, the customer may choose another car brand.”

Currently operating with four plants which has a total capacity of 1 million cars per year, the current expansion is expected to be completed by 2012 and the outputs will begin to roll out by mid 2013 as confirmed by the spokesperson at Suzuki Motor, Hideki Taguchi.

Today at New Delhi, Osamu Suzuki has commented “Demand for cars in India has grown beyond our expectations. Some models we’re not able to supply because of supply constraints.”

In August Maruti’s sales were at a record high of 24 per cent at 104791 vehicles being sold. 20 continuous months of increase in sales has been posted by the automaker as a result of the increasing disposable incomes and the economic growth.

With close to 30 percent increase in India in demand for cars, the sales are expected d to touch the 3 million mark by 2015 according to a report by the SIAM, society of Indian Automobile Manufacturers. Other car manufacturers too are gearing up to cash in n the current demand with Ford motor planning to introduce eight new models by 2015 and Toyota Motor Corp. planning to introduce its hatchback Etios in India by December.