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Monday, 28 Oct 2013
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Indian Automobile industry facing acute slowdown


The Indian automobile industry is facing acute slowdown mainly due to the current economic scenario. The April-September 2013 production and sales numbers clearly indicate that all is not well with the industry.




The economic slowdown and depreciation of the Rupee, along with the rising fuel prices and high interest rates have dampened the auto industry. The three per cent increase in excise duty of a certain category of UV products has also added to the industry’s woes. The April-September 2013 estimates show a sharp deceleration in car production and sales as compared to the same period last year.


The year 2013-14 began with a drop, with 16,84,011 vehicles being produced in April 2013 as against 17,21,455 in April 2012, showing a decline of 2.81 per cent. The trend continued in the first half of the fiscal. During the April-September period, passenger vehicle production was down by around two per cent at 15,19,609 units. The passenger vehicle segment saw its sharpest drop in the month of June 2013 with 2,15,146 being produced. During the same period, passenger vehicle sales fell five per cent to 11,98,878 units. The passenger car sales took a sharp drop in July 2013 with only 1,86,239 units being sold.




As for commercial vehicles, production dropped nearly 12 per cent to 363,714 units, while commercial vehicle sales dropped by 15 per cent to 3,26,648 units. Among two-wheelers, production of motorcycles was marginally down at 5,960,264 units while production of mopeds fell 11 per cent to 3,46,350 units.


The auto industry’s lagging growth rate and an overall negative market perception has forced auto companies to halt their expansion plans. Yamaha Motor recently announced that they are delaying the commissioning of their two-wheeler plant in Chennai, by a year, due to economic slowdown. Yamaha Motor signed an MoU with the Tamil Nadu government for setting up the two-wheelers manufacturing plant in May 2012. The two-wheeler plant with a capacity of 2.8 million numbers per year is being set up at a cost of Rs 1,500 crore. Earlier, the plant was supposed to be commissioned in early 2014 but owing to the economic slowdown the company has decided to commission the plant by end 2014 or early 2015.


However, Yamaha Motor’s India investment plans are on, as the company is upbeat about its future in India and is targeting a production capacity of 50 lakh units by 2020. At present, Yamaha has two plants in India, one at Greater Noida, with a manufacturing capacity of 10 lakh units per annum, and another at Faridabad, where it manufactures automobile ancillaries.


Maruti Suzuki India has also delayed the commissioning of its facility in Mehsana, Gujarat. The plant is being set up with an investment of Rs 6,000 crore and will roll out 25 lakh passenger vehicles when commissioned. Although the plant was supposed to be commissioned by the end of 2015-16, the company has announced that the target seems highly unlikely now with the current scenario. So far, the passenger car project is still in the planning phase.


Notwithstanding the current impasse, the auto industry is looking forward to the coming festive season and hopes to see some recovery in the coming months.

While the decision of companies like Honda Motorcycle and BMW to go ahead with their current projex plans indicate their faith in the Indian domestic market, it will be some time before the automobile industry bounces back to the pink of health.


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Quote of the week:


Hiroyuki Suzuki_India Yamaha Motor_ProjectsToday

"We have decided to postpone the Chennai plant operationalisation by almost a year as the economy is not doing that well. We have to follow the Indian market conditions and have our schedule accordingly."

Hiroyuki Suzuki,
CEO & Managing Director,
India Yamaha Motor

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