Car sales shoot up in August

New Delhi: After two years of shrinking Indian sales, automakers are moving back into the fast lane as the economy picks up, although analysts say it may be a few years before the industry goes full throttle again.

Car sales grew for a fourth straight month in August in what analysts say heralds a brisk religious holiday season, the two-month period ahead is seen as an auspicious time to buy. ‘The consumer mood certainly seems better for the industry with the election of a new right-wing government in May’, said Deepak Rathore, director of Delhi-based consultancy Emerging Markets Automotive Advisers

"The strength of total sales numbers is increasing month-to-month. But it's only some of the well-established carmakers benefiting, the rest are still struggling." All this adds up to a cheerier backdrop for the annual conference of the Society of Indian Automobile Manufacturers (SIAM) in New Delhi on Thursday.

Automakers have lined up a slew of launches to drive demand and nudge consumers off motorcycles into low-cost cars while getting existing owners to upgrade to larger sedans and SUVs. Until the 1990s there were just a few models on sale in India. Among them were the bulky Ambassador modelled on Britain's 1950s-era Morris Oxford, which has just halted production, to the dismay of retro-auto buffs and the zippier, boxlike Maruti 800.

As India's market liberalisation began, the middle class expanded and an affordable array of foreign vehicles became available. But lack of dealerships, poor customer service and products ill-suited for India's potholed roads deterred buyers. However, even during the latest slowdown, the foreign luxury segment grew sharply, and now BMWs, Audis and Mercedes-Benz sedans proliferate at fancy malls.

Experts say first-time buyers will still be the big growth driver for many years. India has just 15 cars per 1,000 people, according to industry figures -- among the lowest rates in the world. China in comparison boasts 60 per 1,000; in Brazil it is 200 and in the United States, 800. Though some cities like Delhi boast shiny, albeit congested, new subway systems, rush-hour public transport is an ordeal and people are in no rush to abandon their cars, which are widely seen as status symbols.

Car sales of Japanese-controlled market leader Maruti Suzuki leapt 27 per cent year-on-year in August. South Korea's Hyundai, Maruti's nearest rival in the Indian market, reported a 19 percent increase. But Japanese carmaker Honda was the star in percentage growth terms, with sales climbing 88 per cent. "The festive season has already set in and will bring further cheer," Honda senior vice president Jnaneswar Sen said. SIAM deputy director-general Sugato Sen said the Indian industry was set to "clock positive numbers" for the year to March 2015, reversing a six-percent contraction last year.

While SIAM has given no growth projection for the year, analysts forecast an eight-to-12-percent rise in passenger car sales. With pent-up demand and an overall positive (consumer) outlook, the car segment can log up to 12 percent growth", said Abdul Majeed, partner at global consultancy Price Waterhouse Coopers.

Rathore said car sales growth could hit 15 per cent next yea, a figure he described as "not bad", though far shy of the 30-percent growth posted as recently as 2010-2011.

But for a number of foreign carmakers that have bet big on India, investing billions of dollars in plant and equipment to offset struggling Western markets, the news from Asia's third largest economy still isn't good. Ford India's domestic sales dropped 15 per cent in August while GM reported a 37 percent slide. "The lesson is it doesn't matter how much a market is expected to grow, what you do in that market decides your fate, whether you have the right products," said Rathore.