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Indian automakers to see muted demand till October

Switch to new emission norms to push up vehicle prices

The Society of Indian Automobile Manufacturers expects the industry to report better sales only from the second half of the next fiscal year.   © Reuters

MUMBAI (NewsRise) -- Indian automakers are unlikely to see a recovery in sales before the festive season in October as weak consumer sentiment and high cost of vehicles weigh on demand, the nation's main industry group said.

The Society of Indian Automobile Manufacturers, or SIAM, expects the industry to report better sales only from the second half of the next fiscal year starting in April, said Rajesh Menon, its Director General.

Car sales in India dropped a record 19% in 2019 as consumers remained wary of spending in a slowing economy, according to SIAM. Automotive demand in Asia's third-biggest economy has been cooling for more than a year, weighed by a credit crunch in the financial sector. The slowdown in sales prompted many companies including Maruti Suzuki India, the nation's biggest carmaker, to slash production.

"By the second half of the next financial year, we will see better numbers," Menon said. "That is when the next festival season begins."

Automakers usually witness a surge in demand during festivals when consumers spend on everything from electronics to jewelry to cars.

The industry is also in the midst of making a final transition to the less-polluting Euro VI emission norms in April. Menon expects the price increase on account of the transition to be a major deterrent to sales in the first three months of the next fiscal year.

The industry has been seeking a delay in the shift to new fuel standards, citing the slowdown. The outbreak of the deadly coronavirus in China poses a fresh hurdle as several Indian companies depend on Chinese suppliers for components.

Last week, Mahindra and Mahindra, one of India's top sport-utility vehicle makers, said a component shortage may adversely hit production of certain vehicles and potentially delay India's shift to the new emission standard.

According to India Ratings, the industry is likely to post flat-to low-single-digit growth next year. The rating agency cut its outlook on the sector to 'negative' from 'stable-to-negative.'

Meanwhile, passenger vehicle sales continued its downward slide in January, with sales declining 6.2% to 262,714 units, SIAM said in a statement on Monday.

Cars witnessed an 8.1% decline to 164,793 units in January, although sport-utility vehicles saw sales rise 2.6%. SIAM's automobile sales are counted as factory dispatches, and not retail sales.

Earlier this month, Maruti Suzuki reported a 1.6% rise in total January sales, though domestic sales of passenger vehicles remains unchanged.

Mahindra & Mahindra, the maker of Scorpio and Bolero SUVs, reported a 17% drop in January sales of its passenger vehicles, while Tata Motors saw an 18% slump.

Domestic sales of trucks and buses fell 14% to 75,289 units in January. Sales of two-wheelers declined more than 16% to about 1.34 million units, the SIAM data showed.

--Rituparna Nath and Dhanya Ann Thoppil

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