Is auto industry's dream run over for now?

Riken Mehta

Among the many indicators of an economy's health, auto sales numbers very correctly reflect the economy's performance. The CNX Auto index hit a life-time high of 5007.65 on January 10 this year. However, elevated fuel prices and drop in discretionary spending have resulted in lower footfalls in  showrooms for the past few months. Hefty discounts and attractive loan schemes have failed to lure buyers and revive sluggish demand.

The recent hike in diesel prices have led to a drop in diesel vehicle sales adding further to the woes of manufacturers. The CNX Auto index has shed more than 11% from its peak in less than two months.

A recent survey by Emkay Broking with 50 dealers indicates a poor and deteriorating demand environment across all three major vehicle categories.

Analysing the auto sales numbers for the month of February, 2-wheelers segment reported 4% decline in sales compared to last year. The Cars segment has posted a staggering 24% drop in sales. Light Commercial Vehicles (LCV) and Utility Vehicles (UV) recorded growth of 12% and 18% respectively. Medium Commercial Vehicles and Heavy Commercial Vehicles segment was down a whopping 36%.

Softening interest rates and revival in consumer sentiment is the only hope for the auto industry.