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Is the automobile industry out of the woods?
Thu, 12 Mar Pre-Open

The automobile industry has its fortunes tied directly to the economy. Therefore improving economic outlook, lower inflation levels and softening interest rates spell good news for the industry. However sale trends across categories have sent out a mixed signal. On a positive front, sales of passenger cars and commercial vehicles continued their growth momentum for the fourth month in a row in February 2015. As a matter of fact, sales of trucks and buses recorded the fastest growth in three years.

However, falling sales of motorcycles and light commercial vehicles remain a cause of concern. According to Society of Indian Automobile Manufacturers (SIAM), sluggish demand in rural India has adversely impacted offtake of motorcycles and light commercial vehicles. The industry body remains hopeful that a good monsoon is likely to revive rural demand. Even higher allocations to NREGA scheme in the Union Budget 2015-16> is expected to drive recovery in rural income and demand.

The passenger vehicle industry has been on a steady growth trajectory on the back of robust offtake of passenger cars and utility vehicles. The industry registered a rise of 4% in April-February 2014-15. But the recovery has not been across the industry with dwindling sale numbers being reported by a large number of manufacturers. As per SIAM, only five out of 18 passenger vehicle manufacturers are witnessing growth in offtake.

On an overall basis, the automobile industry is on a recovery track with volumes up by 8% during the period April-February 2014-15. But the recovery has not been broad-based to be sustainable in the long run. However, factors such as the government's focus on reform-led economic growth along with the further rate-cuts by RBI are likely to improve consumer sentiments and propel vehicle demand in future.

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