May 2012: Indian auto industry records slowest growth rate in seven months

Increase in petrol prices combined with high interest rates seems to be taking their toll, and this is not the end, it’s just the beginning. Analysts fear the automotive industry is yet to see the worst times. The Rs 7.50 price hike in May has affected manufacturers and consumers.

With dwindling vehicle sales because of the manic petrol hike, automobile manufacturers have been forced to reduce number of units produced per month, which in turn is expected to affect their annual sales in a big way. As per data by SIAM (Society of Indian Automobile Manufacturers), the month of May recorded the slowest growth rate in car sales since October 2011.

Trouble for manufacturers and consumers is far from over. In fact fresh trouble seems to be brewing with the government unable to bridge the price gap of diesel and petrol. Heads of automobile companies are raising a hue and cry over the huge price difference between petrol and diesel, and why wouldn’t they?

Mr Vishnu Mathur, Director General, SIAM, said, “This is the slowest growth since October last year when car sales witnessed a 24% decline. Demand for passenger cars may move into negative territory because the overall market sentiment is very negative. Moreover, the increased in petrol prices have also affected sales last month.”

The most affected car manufacturer in May was none other than country’s largest car maker, Maruti Suzuki. Maruti’s sales declined by 4%, the highest for the year 2012. According to auto industry expert, Mr Kumar Kandaswami, Senior Director, Deloitte Touche Tohmatsu, India, “There is a subdued impact by a slew of negative measures by the government that has increased the cost of owning and operating cars. Government needs to bring down the interest rates and tame inflation, otherwise the current scenario of potential customers postpone purchase decisions would continue for few more months resulting into further drop in sales.”