A slowing economy and record fuel prices have slammed the brakes on the once-booming car market with sales falling first time in a decade.

Passenger car sales fell almost 7 per cent in 2012-2013 to 18.95 lakh units compared to 20.31 lakh units in 2011-12, dampened also by weak buyer sentiment and high interest rates. Passenger car sales last dropped in 2001-02, Society of Indian Automobile Manufacturers (SIAM) said on Wednesday.

“The overall economic growth was not so encouraging last fiscal. Higher cost of ownership impacted car sales. Also, negative sentiments, particularly among lower-end customers, resulted in falling sales,” said SIAM president S. Sandilya. Overall, the industry’s sales fell the steepest in 12 years. Reflecting the overall slowdown, commercial vehicle sales were down 2 per cent during the year at 7.93 lakh units compared to 8.09 lakh units in 2011-12. Sales of medium and heavy commercial vehicles also dropped by 23 per cent to 2.68 lakh units during 2012-13 (3.49 lakh units).

SUV sales zoom

Bucking the trend were utility vehicle, including sports utility vehicles (SUVs), whose sales hit a record 5.53 lakh units, up a whopping 52 per cent over the 3.63 lakh units sold in 2011-12, said the auto industry body.

Sales of three- and two wheelers were up by 5 per cent and 3 per cent respectively during the last financial year. While total three-wheeler sales grew to 5.38 lakh compared to 5.13 lakh the previous year, 1.37 crore two-wheelers were sold in 2012-13 (1.34 crore units).

Cumulative production data for the year showed a growth of 1.20 per cent over 2011-12. In March, the industry produced 16.85 lakh vehicles, down almost 9 per cent compared to 18.45 lakh units in the same month last year. However, this March, all two-wheeler sub-segments reported a dip — scooters 9-3,18 per cent), motorcycles (- 8.32 per cent) and mopeds (-4.54 per cent).

Optimistic about FY13

But the industry is optimistic, with SIAM expecting a growth of 6-8 per cent across segments in 2013-14. In the passenger cars segment, 3-5 per cent growth is expected, said Sandilya. But, according to analysts, it may be time for the auto industry to change lanes as the slowing trend is expected to continue this year.

“I expect financial year 2014 to be a difficult year, and the industry should use this time to reconfigure its business models and operations when growth returns from fiscal year 2015 onwards,” said Rakesh Batra, National Leader, Automotive Sector, Ernst & Young.

He said the lack of a stable policy on diesel pricing adds to the uncertainty impacting new investments. The partial deregulation of diesel prices has already resulted in some demand shifting from diesel to petrol vehicles in the last quarter of 2012-13 and this trend, he said, is expected to continue into 2013-14.

> ronendrasingh.s@thehindu.co.in

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