Interest Rates And Elections Will Temper Recovery
BMI View : We see the malaise, which the the Indian auto industry has been experiencing since the beginning of 2013, spilling over into 2014, due to the lingering uncertainty over the upcoming federal elections and elevated interest rates, which should ensure that the recovery in FY2014/15 will remain modest. A dominant theme for 2014 could be the comeback of petrol variants as diesel pump prices creep up and erode the fuel's cost advantage over petrol.
According to the Society of Indian Automobile Manufacturers (SIAM), Indian passenger vehicle sales (sum total of passenger car, utility vehicle and van sales) for November 2013 came in at 201,520 units, a decline of 10.2% y-o-y. While SIAM has not yet released its December sales figures, initial industry estimates suggest a y-o-y decline of at least 5%, which would bring sales growth for the first nine months of FY2013/14 (April-March) to about -6% y-o-y.
The bearish trend in commercial vehicle (CV) sales is similar with sales for the first eight months of FY2013/14 contracting by an eye-watering 17.5% y-o-y. We said in October 2013 that a real recovery in the Indian auto sector remained some time away and our bearish view on the sector continues to play out (see 'Debt Laden Infrastructure Firms Affect CV Sales', October 10 2012).
|Recovery Still Elusive|
|India - Domestic Passenger Vehicle Sales, Units (LHS); % Chg y-o-y (RHS)|