SIAM Anticipates Carmakers To Miss The Sales Target In FY2019

2018 was a mixed bag for carmakers in India as there were several roadblocks which the industry body didn't see coming. At the start of 2018 the sales started on a good note as the first quarter of the Fiscal Year 2018 posted healthy sales. However, that didn't go for long on the wake of several disruptions which affected the sentiments of car buyers and in-turn the sales in the auto industry. Therefore, the Society Of Indian Automobile Manufacturers (SIAM) is expecting to miss the growth target of 7 per cent for the passenger vehicle segment in FY2019.

"We had kept a growth target of 7 per cent in the beginning of the year which cannot be possible now because to achieve an 8 per cent growth in the last quarter is unlikely to happen. So it will be lower than what we had forecast. Factors like fuel prices, unavailability of fund as NBFCs don't have the money, interest rates are climbing up all have consequently generated a negative sentiment and car sales were subdued," said Rajan Wadhera, President- SIAM and President of Automotive Sector- Mahindra. The Passenger Vehicle segment has recorded a growth of 4.37 per cent in the first three quarters (April-December) of FY19 selling 25,33,221 units and needs almost a two-fold growth of 8 per cent in the last quarter to meet the target of 7 per cent.

Carmakers would require to post a two-fold growth in the last quarter to achieve the growth target of 7 per cent.

The slow growth in the sales had been due to several headwinds. To begin with, in the FY19 budget the government had increased the tax on CKD components to 15 per cent which led to an increase in the price of the models which are assembled in India using export components. Moving ahead in the second quarter, fuel prices went on surging to a new peak and crossed Rs. 90 mark in some states like Maharashtra and Gujarat which took a major toll on sales. Furthermore, the lending rates were also increased ahead of the festive season coupled with a poor performance by NBFCs which made it difficult to get car loans at a reasonable interest rate which could have given a strong fillip to the volumes. And to top it all, customers now need to pay a one-time insurance premium for three-years which has increased the on-road price of vehicles by around 18 per cent. Moreover, as a part of cyclical price revision, almost all the major carmakers have also increased prices across their product line-up from January which may also keep the volumes under pressure.

That said, though the growth in Q4 may not be good enough to meet the target, the industry body is expecting it to be better than the last two quarters on the account of several improvements. For instance, it is a general tendency among car buyers to postpone their purchases to the New Year in order to avoid depreciation of the old model. Moreover, SIAM is also expecting pre-buying to happen on the onset of BSVI norms as carmakers are expected to roll-out discounts in a bid to clear old inventories.