Indian auto industry drives in slow lane in FY08

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Indian auto industry drives in slow lane in FY08

The Indian auto industry's overall sales fell 4% during the last fiscal as compared to a growth of 13.5% during the previous year, even though some segments within the industry posted growth. The Indian auto industry will have to devise new ways to fight the problems of rising inflation and interest rates to avoid a tougher year this time.

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By Sumantra Barooah , CNBC-TV18

The Indian automobile industry is facing some tough times. The industry's overall sales fell 4% during the last fiscal as compared to a growth of 13.5% during the previous year. That performance, even though some segments within the industry posted growth.

The Indian automobile industry is fighting hard to keep driving on the growth lane.

Only two of the four segments within it grew during the last fiscal and only one posting a double digit growth. Passenger vehicles grew 12%, with the  passenger car category growing a shade below it.

Hyundai , which grew 11% during the period says industry growth has been slower than expected and the reasons could also be due to the subprime crisis in the US.

HS Lheem, MD, Hyundai Motor India, says, "Much less than expected I feel. Many IT cities like Hyderabad, Bangalore, Chennai may be affected by subprime mortgages from US. It looks like industry demand is down but I hope that by Q2, Q3 it should recover."

The motorcycle segment was largely responsible for the overall decline of the automobile industry. The 12% fall in motorcycles and 44% drop in the small category of electric two-wheelers negated the growth of 11.6% in scooters and 16.6% in mopeds and resulted in a 8% drop in overall two-wheelers.

So, when will the motorycyle market see a turnaround?

Pawan Munjal , MD, Hero Honda , says, "That's a  question I don't think anyone of us can answer."

And volumes in the commercial vehicles segment, also considered as a barometer of the economy fell over 4%. The figures may not give the actual picture as the industry is moving towards multi-axle vehicles with better carrying capacity than the conventional trucks. Sales of medium and heavy commercial vehicles fell close to 2% and light commercial vehicles grew a little over 12%. Three-wheeler sales, which fell close to 10% also impacted overall industry growth.

After a tough year, the Indian auto industry will have to devise new ways to fight the problems of rising inflation and interest rates to avoid a tougher year this time.