Wobbly car firms seek sop therapy

New Delhi, Jan. 9: Stung by a sharp decline in December business, car makers are now projecting flat sales for the current fiscal and urged the government for immediate steps to revive their fortunes.

The Society of Indian Automobile Manufacturers (Siam) today lowered its growth forecast for car sales to 0-1 per cent for this fiscal from 10-12 per cent earlier.

"Based on the third-quarter show, Siam is revising the projections. There are significant changes in expectations based on performance of all segments till date," Siam president S. Sandilya said.

Siam deputy director-general Sugato Sen said continuous changes in the overall economic scenario as well as the domestic and international markets impacted growth.

"Initially, we thought that the market will perform well so we projected a growth of 9-11 per cent, but it was not the case. Every time a new issue crops up. So, accordingly we have to revise the projections," he said.

Car sales fell 12.5 per cent in December to 1,41,083 units from 1,61,247 units in the year-ago period because of a slowdown in GDP growth, rising fuel prices and costly credit. It is the sharpest drop since August when sales had declined 18.5 per cent.

"Sentiments have not improved. Interest rates are still high. Even fuel prices remain on the higher side and the economy is down," Sandilya said.

The industry association has demanded a reduction in excise duty and the continuation of benefits under the Automotive Mission Plan till 2026 to revive growth.

"Going by the current trends, we do not think the industry will be able to recover in the fourth quarter unless the government provides support," he said.

Sandilya said there was a need for the reduction of excise duty on automobiles, particularly on commercial vehicles. The excise duty was increased in last year's Union budget.

The Automotive Mission Plan 2006-16 envisages India as a global hub for designing and manufacturing with output reaching $145 billion and accounting for more than 10 per cent of the gross domestic product (GDP).

According to the plan, the industry will require an additional investment of $35-40 billion to meet the target.

The bulk of investments is expected to come from expansion by existing players and the entry of new global brands who plan to make India their manufacturing base.

Car sales had been growing every year since 2003-04. After a 30 per cent growth in 2010-11, a slew of global firms, including Ford, General Motors and Nissan, invested billions of dollars to expand local operations.

However, a series of interest rate rises by the Reserve Bank of India combined with a slowdown in GDP growth saw sales growth falling to 2.2 per cent last year.

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