Vehicle sales report steepest slide in 4 years; SIAM says industry may miss FY16 target by 25%, cuts FY13 sales forecast again The automotive industry has warned that it may miss the government’s Automotive Mission Plan target for FY16 by a large margin after reporting its steepest monthly sales fall in almost four years and slashing annual forecast for a second time — a move that will prompt some companies to revisit their expansion plans. The Automotive Mission Plan (AMP) 2006-2016 target of growing into a $145-billion industry by 2016 may be missed by 20-25% at the current growth rate levels, automotive industry body Society of Automobile Manufacturers Association (SIAM) said on Wednesday. “Economic growth is not encouraging, inflation is not under control and the cost of vehicle ownership is high,” SIAM President S Sandilya said. The industry body also lowered its sales growth projection for passenger cars to just 1-3% for this fiscal from its earlier forecast of 9-11% growth as slowing economy, low consumer sentiment, high fuel prices and interest rates threaten to prolong the slowdown in the market. This revision follows a 9.43% year-on-year slump in overall vehicle sales in September. According to the data released by SIAM on Wednesday, domestic car sales in September fell 5.36%, while motorcycle segment dipped 18.85%, the sharpest decline in three years and nine months. One of the reasons for the sharp decline in September sales is the high base of last year when a major part of the festive season was in September. This year, the festive season is spread out in October and November. REVISITING EXPANSION? R C Bhargava, chairman of the country’s largest carmaker Maruti Suzuki, says the industry will have to take a relook at the capacity expansion plan in the wake of the current slowdown. He said that since the Automotive Mission Plan was made, a lot of circumstances have changed — GDP growth has come down from 9% to 6%, the price of fuel has more than doubled, rupee has depreciated and the cost of operating a car has gone up. “With growth rates coming down, the per capita income has also come down by 3% and therefore, the affordability (of vehicles) has become even worse,” Bhargava said. At a GDP growth rate of 6-6.5%, the passenger car market may grow 9-10% over the next three to five years, from the earlier projection of 14-15%, he said. Bhargava, however, is hopeful of a better second half of the fiscal with positive stimulus coming back in the system in the form of government reforms and buoyancy in stock markets. “The Q3 should be definitely better, with festive season spreading out in October and November, but replicating the same in Q4 will be tough, as the fourth quarter of last fiscal had a very strong base,” Bhargava said. Maruti Suzuki's sales in September rose 3.43% to 68,957 cars. Hyundai Motor India's sales decreased 13.88% to 30,795 units and Tata Motors' car sales slumped 18.46% at 17,133 units. OVERALL SLOWDOWN In the two-wheeler segment, total sales in September fell 12.92% year-on-year to 10,69,069 units, while scooter sales increased 10.17% to 2,54,321 units. Total sales of commercial vehicles in September rose marginally to 70,683 units from 70,658 units in the year-ago period, SIAM said. “Moderating agricultural growth, sustained slowdown in industrial activities and lower replacement volumes are leading to deceleration in demand of heavy commercial vehicles, mainly in the goods segment,” SIAM’s Sandilya said. Medium and Heavy Commercial Vehicle sales declined 14.80% to 26,471 units during the month, while light commercial vehicle sales grew 11.67% to 44,212 units. In the three-wheeler category, sales were flat at 49,576 units. This is the second time SIAM has lowered the growth projection of car sales since it forecast a growth of 10-12% for 2012-13 in April this year. Passenger vehicles sales, which include cars and utility vehicles, have been pegged to grow 8-10% against an earlier estimate of 11-13%. SIAM, however, said that the utility vehicles (UVs) segment, which has seen a jump in sales due to launch of price attractive models, will grow by 50-52% against 29-31% projected before. Two-wheelers are estimated to grow at a much lower rate of 5-7% this fiscal, against an earlier projection of 11-13%, SIAM said, adding that the softening of rural demand and sustained cautious urban sentiments are affecting sales in the segment. The commercial vehicles segment is also forecast to grow at a lower rate of 3-5% as against the earlier projection of 6-8%. Sandilya said SIAM has already approached the government to extend the tenure of the Automotive Mission Plan by another 10 years in the wake of the development. “To further nurture the sector to extract full potential benefit for the economy in terms of contribution to GDP, value addition and employment, SIAM has asked government to look into the possibility of extending AMP till 2026,” he said.