Slow economic growth dulls improvement in Indian car market profitability and metrics for 2013

During last year there were a number of problems faced by car brands in India. One of the most important problems was rising price of raw materials and fuels coupled with a slow economic growth. According to India Ratings there will not be a drastic change in profitability and metrics in the Indian car market owing to these factors. It should also be noted that in 2008 a similar kind of situation had plagued the industry.

Rising costs of components could be reduced by localizing productions; however, export sales would not be enough to bridge financial gap due to depreciation of the INR. Efforts to enable localization would help to lower costs and could be a basis for growth and profitability to rise improve significantly. It should also be noted that there are a few brands turning to such measures to boost profits and improve growth margins.

Liquidity stress felt by OEM, could have a serious backlash on growth for 2013 due to high working end capitals and longer payable period. Competitiveness relating to exports could make or break the growth sighted for the mid term.