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Plunging Car Sales In Feb Echo Economic Slowdown

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As economists argue about whether or not the repo rate should be slashed by the RBI to kickstart the economy, car sales — often considered an indicator of the country’s economy —  plunged 26 per cent in February, 2013.

February turned out to be one of the worst months in past 12 years in terms of percentage fall as the sales fell to about 158,513 units, according to the Society of Indian Automobile Manufacturers (SIAM), a drop of about 25.7 per cent vis-a-vis February 2012. The first 11 months’ total sales of passenger cars dipped by 4.64 per cent between April 2012 and February this year as against the corresponding period a year before. According to industry experts, car sales between April 2012 and March 2013 are expected to shrink for the first time since 2003 due to slowing economy.

“The cost of owning a car has gone up from around Rs 1,400 per month to Rs 2,000 per month and this has definitely impacted the lower of the pyramid where consumers are staying away from making buying decisions now. The luxury car segment has been doing reasonably fine in comparison,” said Kumar Kandaswami, senior director, Deloitte India. Industry trackers have been arguing that a reduction in the rates for the automobile loans may revive the car sales.

All major car manufacturers saw their sales coming down in the month. For February Maruti Suzuki, the country’s biggest automobile manufacturer grew by 2.8 per cent but other automobile manufactures witnessed a fall in sales. Hyundai sales plunged to 7.62 per cent; Tata Motors saw a fall in its car sales by 69 per cent, General Motors by 20 per cent and Ford by 44 per cent.

“The situation is tough in India for car manufacturers due to the macroeconomic environment, but we are banking on the diesel cars to bring numbers for us,” a senior Maruti Suzuki official said.

According to SIAM, in the current year, car sales may shrink or remain stagnant at best. The automobile body has lowered its outlook for 2013 to 0 to 1 per cent growth. Between 2003 and 2011, the domestic car sales grew around 25 per cent year on year before losing its momentum in 2012.

Total passenger vehicles meanwhile grew by 4.07 per cent in February on strong sales in the utility vehicles at 54.46 per cent. Exports of passenger cars from India also grew 9.42 per cent in February this year against the same period last year. The sales of motorcycles meanwhile fell 4.48 per cent in February to 8,37,743 units.