Festive Season Expected to Ring in Cheer for Auto Sector

Published: 06th October 2014 09:22 AM  |   Last Updated: 06th October 2014 09:22 AM   |  A+A-


MUMBAI: After two years of dampened sales during the festive season, India's automobile sector is hoping for the best this time around as there are positive sentiments on the economy and consumer interest grows.

"Overall, the lead indicators are good. The signal for this year's festive season is positive. Our research shows that the auto sector, especially the two-wheeler segment, will show positive sales results this season," ZyFin Advisors chief executive Davendra Nevgi told IANS.

"The auto sector is one of the first to benefit from the growing economy and disposable incomes. This time around there is also a positive mood around the festive season."

Nevgi is backed by ZyFin's vehicle purchase sentiment index, which has registered a steady uptrend since bottoming out in April.

In September, the index increased by 2.5 points to 17.5, with moderate upticks in consumer willingness to purchase both two- and four-wheelers.

"This signifies that a larger number of Indian consumers are planning to purchase two- or four-wheelers within the next six months. With the festive season coinciding with the uptrend in sentiment, auto sales are expected to be better this season, as compared to 2012 or 2013," the ZyFin report said.

The index reflects plans to purchase vehicles over the next six months based on a monthly survey of 4,000 consumers in 18 cities across India, representing urban consumers.

The onset of festive season did bring in a marginal sales growth in the auto sector, with manufacturers reporting a slight increase in September.

The industry is suffering from high fuel and interest costs, coupled with a slowdown in the economy and negative sentiment due to lack of industrial and mining activity.

"In this festive season, we are seeing a significant increase in first-time buyers and exchange buyers which is very encouraging as it will accelerate the positive momentum already being experienced in the last few months," Hyundai India senior vice president Rakesh Srivastava had told IANS earlier.

"The demand will emerge out of the fact that the economy is growing. GDP growth for the first quarter was positive with a growth of five percent. The policy environment in terms too is also pushing the economy which will also raise the sales numbers this season," Bharat Gianani, senior equity research analyst-auto and auto ancillary, Angel Broking, told IANS.

"There will also be a base effect. In the last two seasons the base growth was slow; so this year there are expectations of robust growth."

Gianani's views were corroborated by Vishnu Mathur, director general, Society of Indian Automobile Manufacturers (SIAM).

"The companies are hopeful for this festive season and think that this season will be positive as we have already seen a slow turnaround happening," Mathur told IANS.

Sales of domestic passenger cars rose 15-16 percent in August, marking the fourth consecutive month of growth in nearly two years of deceleration.

SIAM's monthly data had shown that 153,758 units were sold in August, up from 133,513 units in the corresponding month last year.

On the overall spending trend, the index score improved to 45.2 in September, as compared to 43.6 in the previous month.

"The spending sentiment index assesses willingness to make big-ticket purchases such as homes, home appliances, four- and two-wheelers in the next six months...with improvements in every product category surveyed," the report added.

The euphoria comes despite the central bank's decision to keep key interest rates unchanged in a bid to maintain financial and price stability.

Saying that the country is currently positioned to reach the Reserve Bank of India's inflation target of six percent by January 2016, Governor Raghuram Rajan kept key lending rate, or the repo rate, unchanged at eight percent, the short-term borrowing, or reverse repo rate, at seven percent and the cash reserve ratio (CRR) at four percent.

However, with signs of inflation easing and global crude oil prices at a significant low the overall economic sentiment in the country may grow.

The country's retail inflation slowed down to 7.8 percent in August from 7.96 percent in the previous month.

Even crude oil prices continued to decline, giving oil marketing companies (OMCs) some room to cut prices. On Thursday the benchmark oil index dropped below $90 a barrel. It's the lowest level since 2012, after Saudi Arabia's state-run oil company cut prices in a bid to defend its market share.


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