Indian Automobile Industry on the Recovery Path

• Tuesday, February 02nd, 2010

Strong demand, spurred by imminent emission deadline has pushed auto sales during the month of January to unprecedented heights. Maruti Suzuki, the largest automobile manufacturer in the country posted a whopping 33% increase in sales for the month.

While Maruti’s domestic market surged ahead by 21 % to sell 81,000 vehicles, the export tripled to almost 14,500 vehicles. This is Maruti’s best ever performance in a month till date.

Maruti Suzuki is not the only auto company to benefit from the auto boom. Hyundai Motors recorded a 42% hike in sales during January. The giant of SUV segment, Mahindra & Mahindra posted a 71% y-o-y increase for the January sales.

The general health of the industry is rosy, as the country is emerging relatively unscathed from the global economic slowdown. In a way, recession helped boost car sales, with the government bringing down interest rates, which led to easy availability of car loans.

Another factor that encouraged car sales is the government deadline regarding emission norms. As per the present directive, stricter norms will come into effect from April 2010. This means that all cars sold after this have to satisfy new emission standards. This may result in a price hike. The present rush is to beat this possibility. Improved employment scene and better pay packets have also aided this trend.

The recent RBI policy review is expected to provide added impetus to the automobile industry. The central bank is trying to contain inflation by raising CRR and has left interest rates untouched.

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