Indian auto industry posts their highest sales decline in 11 years

Indian auto industry is going through their worst possible period in 11 years. For the month of October 2011, car sales in India declined by almost 24%, this is also the highest decline rate Indian auto industry has posted since Dec 2000.

The major reasons behind this huge rate of decline are rising fuel prices, interest rate hikes by RBI and Maruti Suzuki. Being the largest car maker in the country, Maruti Suzuki has a close to 50% market share in India. But the recent workers union strikes at their manufacturing plant, has shaken the car maker to the core.

Maruti Suzuki sales have declined by almost 50% for the month of October 2011 and they are yet to post a positive growth rate since the past 4 months. Later, it was reported that Maruti Suzuki are alleging that the car manufacturer paid Rs 1 crore to union workers Sonu Gujjar and Shiv Kumar to put an end to the strike.

All these together, are affecting the growth rate of the Indian auto industry. Mr Vishnu Mathur, Director-General, SIAM, said, “The auto industry is facing the double whammy of high interest rates and rising fuel prices. For any recovery to happen, interest rates have to come down and fuel prices need to cool. Demand for petrol cars has been hit hard. Though customers are keen to purchase diesel cars, production is a major constraint.”

A total of 138,521 cars were sold in India for the month of October 2011 compared to 1,82,704 sold in October 2010. Being a festive season, car makers expect sales to grow substantially during October, but that was not the case this year.

In fact, sales for the month of July declined by 15.8%, August declined by 10.1% and September declined by 1.8%. Mr Arvind Saxena, Marketing and Sales Director, Hyundai Motors Ltd, said, “Traditionally sales get a boost in the festival season, but this year the general weak customer sentiment played spoilsport with the market. We don’t expect any major upswing in the near future as uncertain macro economic environment will continue to affect the industry.”