Indian Passenger Car Market Slows in January, Records Growth of 9% Y/Y

The Indian passenger car market saw muted growth during the first month of 2008, according to data released by the Society of Indian Automobile Manufacturers (SIAM), reports Reuters. The number of vehicles sold during January rose from 104,501 units to 113,899 units, an increase of just 9% year-on-year (y/y).

The top-selling automaker in the country, Maruti Suzuki, posted flat sales after months of strong growth, with its overall tally dipping from 54,372 to 54,366 units. By contrast, second-placed Hyundai enjoyed a bumper month, its sales jumping 39.2% y/y to 24,296 units, while local rival Tata languished in third spot, posting a 13.6% y/y downturn to 15,261 units.

Commercial vehicle sales were even worse hit than passenger car sales in January, with the number of trucks and buses sold falling from 47,251 units to 46,788 units, a decline of 1% y/y.

Outlook and Implications

The downturn in sales during January not only affected cars and trucks, but also the larger-selling motorcycle market in the country, which fell by 14% y/y. This slowdown can partly be attributed to the costliness of financing, according to the director-general of SIAM, Dilip Chenoy, as the Reserve Bank of India has raised interest rates five times since June 2006 in an attempt to curb inflationary pressures. Sales are likely to have been hit in the passenger car segment by earlier incentives, led by Maruti Suzuki, which may well have pulled forward sales. A host of price hikes in January by most of the major players in the market, including Maruti Suzuki, Hyundai, and General Motors (GM), is unlikely to have helped matters.

However, a boost could occur later in the year with the launch of a range of new models. Among the automakers introducing new models will be Tata, which will offer a replacement for its B-segment Indica and a new sport utility vehicle (SUV), as well as the hotly anticipated "1-lakh car" by October, which looks set to take the market by storm. It will bolster its line-up further through its joint venture (JV) with Italy's Fiat, which will offer the more prestigious Linea and Grande Punto models, later to be followed by the 500 and Bravo. South Korea's Hyundai, which has already seen a strong response to its new i10 A-segment model, the main reason for its stunning results in January, is looking to launch further vehicles that have been developed in the country. These are expected to include the i20 B-segment model and, later on, a vehicle that straddles the segment between the Verna and Sonata. Market leader Maruti Suzuki does not intend to be left out of this new vehicle offensive—having already launched a sedan variant of its successful Esteem model in January, it will also begin selling its Splash model, as well as a vehicle based on the concept A-Star by the end of the year.

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