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Jan 10, 2013, 09.10 AM IST | Source: CNBC-TV18

Growth in utility vehicle to help auto industry: SIAM

The Society of Indian Automobile Manufacturers (SIAM) has lowered its annual growth forecast for car sales. SIAM now predicts sales growth of between zero and 1.0 percent.

I hope the government will take up other policy initiatives in the next three months so that in FY14, we are able to look at much better economic growth.

S Sandilya

President

SIAM

The Society of Indian Automobile Manufacturers (SIAM) has lowered its annual growth forecast for car sales. SIAM now predicts sales growth of between zero and 1.0 percent.

In an interview to CNBC-TV18, SIAM’s president S Sandilya says the forecast has been moderated. "If you look at it from the last quarter, third quarter beginning forecast for the year and the currently forecast for FY13 are not significantly different. We said one to three percent, now we are talking about zero to one percent. It is marginally lower," he elaborates.

Also read: Auto exports dip 3 percent in April-December

However, he says, the utility vehicle segment has got a significant growth. "This segment has done exceedingly well. The rural demand has also gone up for the utility vehicles. So, I think that will help the auto industry overall," he asserts.

Below is the edited transcript of his interview on CNBC-TV18.

Q. Car sales forecast now down to one percent for the fiscal. Is this the lowest that one has seen in many-many years?

A: Probably it will be one of the lowest. But I don’t have the statistics readily available. The forecast has been moderated. If you look at it from the last quarter, third quarter beginning forecast for the year and the currently forecast for FY13 are not significantly different. We said one to three percent, now we are talking about zero to one percent. It is marginally lower.

Quarter after quarter, the market has been slowing down because the factors, which are impacting the overall auto industry, have not changed, whether it is interest rates or fuel prices or overall sentiment in economic growth. These things have not changed. Infact they have been going down. The country’s economic forecast is also going down from 6.5 percent to 6 percent to 5.5 percent now. People even question 5.5 percent now. Given the overall change in scenario, there is no wonder why the auto industry’s, particularly the passenger car industry’s forecast is going down.

If you see the passenger car segment, the overall picture, the utility vehicle segment has got a significant growth. That has grown at 50-60 percent consistently over the last three quarters. For the year forecast, we have talked about a significant growth. That is the function of the new models having been launched by many companies. They have launched models at attractive prices.

The passenger buying sentiments have changed. The buying behaviour has changed from buying small vehicles to larger vehicles in terms of utility vehicles. That has augured well for the industry. The rural demand has also gone up for the utility vehicles. So, overall put together this segment has done exceedingly well. So, I think that will help the auto industry overall.

Q. With the overall anti-diesel environment, many feel that it's not if, but when the government will hike diesel prices. Infact, the oil ministry has moved that note on the hike. In that case how do you see sport utility vehicle (SUV) and utility vehicle (UV) sales going forward since the bulk run on diesel?

A: These are two different issues. The diesel anti-sentiment is in terms of taxes being raised on diesel cars. However, diesel price increases are not anti-diesel. SIAM has been always saying that diesel prices must be deregulated, which means the diesel prices should be market led, they should go up and the gap between the petrol and the diesel prices should come down. That is a stand SIAM is been taking time after time and we continue and are consistent with our argument on this.

However, diesel cars being taxed separately by the way of excise duty is a retrograde step for the simple reason that the consumption by these cars of diesel in the overall diesel consumption is a very minuscule percentage. It doesn't at all call for increase in taxes. If you look at diesel prices being deregulated, the prices go up and it will have an impact on the diesel car sales.

Customers will look at the total cost of ownership. We believe that it is not going to have a significant impact on the overall economy. It is a good step and we must take it faster not necessarily in terms of per month increase. Whichever way it is done per month or at one stage it needs to be increased, deregulated, and ensured that it is market led.

Q: The budget is around the corner. What is the auto sector hoping for this time around? The Finance Minister is fiscally constrained, what are you hoping to do?

A: Our Budget wish list is on multiple fronts. Firstly, on the excise duty front, we have asked for rationalisation of excise duty. Reducing excise duty on small cars and large cars, the excise should be rationalised and brought down from the earlier levels. In case of  commercial vehicles also, the excise duty on chasis that was increased last year by 3 percentage points and subsequently reduced by 1 percentage point must be scrapped and brought back to the original levels. This is from the excise duty perspective.

Secondly we do expect the goods and service tax (GST) implementation announcement effective from April 1. The states may have problems to accept it. The same thing happened when we implemented value added tax (VAT). There were few states which were not wanting to implement, but ultimately when implemented, every state has benefited and the overall revenues have gone up.

I hope the government will take up other policy initiatives in the next three months so that in FY14, we are able to look at much better economic growth and much better growth for the auto industry as a whole.

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