Indian Automobile industry

Indian automobile industry has gone major rapid changes in the last 14 years. I would be discussing only cars here because i love discussing about Cars.Before 1983 there were only 2 cars manufacturers in India ambassador(Hindustan motors) n Fiat, both cars were big in size and also expensive( and also not attractive,although some may argue on it.) Then in 1983, a joint venture between govt of india and suzuki motor corporation took place to produce small cars in india. Then came maruti 800. This car was  highly successful  and was largest selling car in India till suzuki Alto replaced it.

1998 was a great year for indian car industry as three new models(small cars) were introduced by three different manufacturers( namely hyundai santro, daewoo matiz and tata Indica). Out of three SANTRO become the most successful and was second largest selling car in india till 2008. In the last 4-5 years many new models have been launched in different segments and many car manufactures have come and set-up shops in India and selling all types of cars( hatchbacks, sedans,MUVs, SUVs). Nissan n Renault are the latest to join the list and Peugeot will also start  manufacturing cars in India by 2014. car industry was witnessing a good growth in India (neglecting the slump in 2009 because of recession) till  mid-2011. High inflation made RBI hike interest rates  and this took a toll on sales (In india ,75% of the cars sold are sold on credit.) People started shifting their demands and the manufacturers had to look for other options to sell a car. some had a tie up with financial institutions to sell a car at an interest rate below the bank rate (Hyundai did this thing to lure customers.)

Now, car manufacturers have another problem in hand, the problem of fuel price hike. people are re-thinking whether they should buy a car or not since petrol prices have crossed 70 mark in delhi. As a matter of fact Suzuki Alto had a 40% reduction in its demand as its sales fall  from 32k to 17k and was replaced by suzuki swift as the largest selling car in the month of April 2012. Swift sales are increasing because of its diesel  model. Diesel car sales are at an all time high because of their fuel efficiency and also huge subsidy provided by govt on diesel, perhaps this is the only thing which is saving car manufacturers at the moment. Subsidized diesel is for poor people but as of now SUV owners  and luxury car owners are making good use of it. Running cost of a  diesel car is Rs 2.5/km whereas  on petrol Its Rs 6.5. With increased VAT by delhi govt, Running cost of a CNG car is Rs 2 and considering the time one has to wait  for his turn at CNG gas station, Its better to go for a diesel car then a CNG one( Govt attempts to go green fall flat.. :D  ).

 

MAY 2012  sales figures

Now the car manufacturers have a problem in hand , how to sell their petrol cars( they have spent huge amount of money in setting up engine plant and getting other things in order). Perhaps giving Huge discounts is the most they can do now. Govt of india is thinking of putting a diesel tax( to recover part of subsidy on diesel) on vehicles, If this thing is approved this will be another blow on car manufacturers.Even if govt do impose diesel tax on vehicles then its nothing wrong as majority of private diesel cars are above  Rs 5 lacs and are owned by upper middle class and high class people who drive their cars daily to go to their workplace and do not use public transport. Subsidy is not for them, it is for poor.Putting tax on diesel vehicles will reduce demand of diesel cars and increase sales of petrol cars.It will also result in less consumption of subsidized diesel.Another solution can be dual pricing of diesel for commercial and private cars  but this can cause black marketing and corruption.

 So car makers who enjoyed golden period from 2005-2011 are in for a tough task here. What will be interesting to see is their marketing strategy to sell petrol cars and also increase their production of diesel vehicles( and with no clear policy on diesel, they may not go for big investments in diesel cars.)