Indian car sales suffer biggest fall in eight years
Sunday, 14 December 2008
Joe Leahy in Mumbai
INDIAN car sales last month recorded their biggest fall in eight years as tight liquidity and high interest rates hit one of the world's fastest-growing automotive sectors.
The crunch is raising questions over the future of a number of joint ventures set up in India's vehicle sector in the past one or two years as foreign investors scale back their plans, amid problems in their home markets and overseas.
Car sales dropped 19.4 per cent in November against a year earlier to 83,059 units, while truck sales fell nearly 50 per cent to 20,637 units - the worst drop in at least 10 years, according to figures released by the Society of Indian Automobile Manufacturers (Siam).
"In the long term, most of these joint ventures will go through but in the short term we will see some delays in investments," said Abdul Majeed, head of the automotive practice at PricewaterhouseCoopers.
Among those delaying plans, Nissan and Renault said a proposed joint venture car factory would begin production as scheduled in the first half of 2010 but with one shift, rather than two.
Nissan is also planning to delay the launch of light commercial truck manufacturing with its partner, Ashok Leyland, the country's second biggest truck maker, by six months to late 2011.
Heavy truck sales at Ashok Leyland fell 67 per cent last month and by 60 per cent at bigger rival Tata Motors.
"In our history, all segments have never been down so badly together in a month," Dilip Chenoy, Siam's director general, told reporters.
India's economy is set to slow from near double-digit growth to what some economists predict could be less than 7.0 per cent next year.
The central bank has slashed interest rates by 250 basis points in the past two months from a seven-year high of 9.0 per cent.
The Indian government has announced a fiscal stimulus package and tax incentives but most commentators believe it is not enough to make a significant difference. Tata Motors the other day announced it would cut prices by as much as Rs23,000 ($472) on its standard passenger cars in line with the tax cuts.
Ravi Kant, Tata Motors managing director, earlier told the FT that the government needed to inject liquidity into the sector to help suppliers whose banks are refusing to roll over their loans. Lower interest rates are also needed to encourage consumers to buy so that dealers can clear inventories.
"They have to bring down the cost of funds," he said.
"Three years ago, [the interest rate on vehicle] financing was 6.0-8.0 per cent in India, it went up to 17-18 per cent. Now it has to come down for people to again start moving forward."
FT Syndication Service
INDIAN car sales last month recorded their biggest fall in eight years as tight liquidity and high interest rates hit one of the world's fastest-growing automotive sectors.
The crunch is raising questions over the future of a number of joint ventures set up in India's vehicle sector in the past one or two years as foreign investors scale back their plans, amid problems in their home markets and overseas.
Car sales dropped 19.4 per cent in November against a year earlier to 83,059 units, while truck sales fell nearly 50 per cent to 20,637 units - the worst drop in at least 10 years, according to figures released by the Society of Indian Automobile Manufacturers (Siam).
"In the long term, most of these joint ventures will go through but in the short term we will see some delays in investments," said Abdul Majeed, head of the automotive practice at PricewaterhouseCoopers.
Among those delaying plans, Nissan and Renault said a proposed joint venture car factory would begin production as scheduled in the first half of 2010 but with one shift, rather than two.
Nissan is also planning to delay the launch of light commercial truck manufacturing with its partner, Ashok Leyland, the country's second biggest truck maker, by six months to late 2011.
Heavy truck sales at Ashok Leyland fell 67 per cent last month and by 60 per cent at bigger rival Tata Motors.
"In our history, all segments have never been down so badly together in a month," Dilip Chenoy, Siam's director general, told reporters.
India's economy is set to slow from near double-digit growth to what some economists predict could be less than 7.0 per cent next year.
The central bank has slashed interest rates by 250 basis points in the past two months from a seven-year high of 9.0 per cent.
The Indian government has announced a fiscal stimulus package and tax incentives but most commentators believe it is not enough to make a significant difference. Tata Motors the other day announced it would cut prices by as much as Rs23,000 ($472) on its standard passenger cars in line with the tax cuts.
Ravi Kant, Tata Motors managing director, earlier told the FT that the government needed to inject liquidity into the sector to help suppliers whose banks are refusing to roll over their loans. Lower interest rates are also needed to encourage consumers to buy so that dealers can clear inventories.
"They have to bring down the cost of funds," he said.
"Three years ago, [the interest rate on vehicle] financing was 6.0-8.0 per cent in India, it went up to 17-18 per cent. Now it has to come down for people to again start moving forward."
FT Syndication Service