The year 2013 was not a very encouraging year for Indian automobile market as the sales went through a record low reflecting the negative sentiments in the market. The slowdown has also severely affected growth in domestic sales which was a slim 1.2% in 2013 (Jan-Nov) as compared to 6.2% during 2012 and 14% in 2011.
Many automobile companies shifted attention to exports but then that too seemed to lose its sheen. According to Dun & Bradstreet India, auto exports grew by 5% which was primarily pushed by two wheeler exports at 4.2%. If year 2013 was warm for exports, the New Year too will not bring any relief to the manufacturers because of the non-tariff barriers and preferential duty agreements inked by EU with certain African and Latin American countries. These statistics do not support India’s Global export hub dream.
The two wheeler industry which plays a major role in sales also suffered in 2013 because of raised fuel prices, high interest rates and inflation. Analysts claim that these factors were responsible for damaging the sentiments of the prospective consumer. The domestic sales growth which was 15.9% in 2011 has drastically dropped to 4.1% in 2013. In 2014, there will be a slight change in this trend as it is expected that the sales will pick up from second half of 2014 provided there is moderation in inflation levels and also uplift from low sentiments of customers.
Rising fuel prices and high interest rates have further increased ownership costs. The same will continue in the following New Year too. Car makers however see an opportunity in later half of 2014 where they hope to regain lost ground. Also, the difference between petrol and diesel prices has come down so the trend of diesel cars overpowering their petrol counterparts will drop as diesel cars are more expensive.
Weak sales and heavy discounts will further reduce profit margins as companies strive hard to get sales growth. This slowdown in profit margin will remain till first half of 2014 as post that there is some hope of revival.