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Indian Automobile Industry?s Sale Declined Again in February 2008
Apr 09, 2008

Sales reported by the Indian automobile industry dropped by 10.34% in February 2008 due to bad performance by two-wheeler segment and poor credit system in the country.

According to the Society of Indian Automobile Manufacturers (SIAM), the total sales of automobile industry slumped by 10.34% in February 2008. The main cause of decline was the falling sale of motorcycles that plunged by 17.68% in the country, as reported by Hindu.

As per the data released by SIAM for February 2008, 742,027 vehicles were sold in the domestic market in February 2008 whereas 827,594 vehicles were sold in the corresponding month last year. Industry experts held the two-wheeler sector responsible for the fall as its sales slipped down by 14.25% to 542,578 vehicles in February this year against 632,712 vehicles in February 2007. Passenger car segment marginally improved with 94,756 cars in February 2008 against 92,618 cars in February 2007, though the fear of high interest rates is still threatening the industry.

According to the industry experts, poor credit system for automobiles is the main cause for decline of automobile sale in the country. Some particular markets are devoid from credit financing and the markets where credit is available, interest rates are maintained high. Tight credit policies are adversely affecting the growth of the Indian automobile industry. Moreover, spiraling fuel prices are also keeping customers away from buying vehicles.

Apart from this, customers deliberately postponed their plans of buying vehicle in view of some relaxation in excise duties in this year’s budget. Even the prices of automobiles increased significantly creating pressure on consumers. Now the automobile dealers are pressurizing the government for reduction in excise duty over new automobiles to fuel the demand.

Hence, Indian Finance Minister, Palaniappan Chidambaram, curtailed excise duty from earlier 16% to 12% on all vehicles including buses, small cars and two wheelers in the current budget. This initiative will certainly help in boosting the demand for automobiles in the country.

A Senior Research Analyst at RNCOS said, "Poor credit system in India is capping the sales growth in the automobile industry though the country has been continuously growing at a rapid pace on the economic front. In such circumstances, auto dealers and manufacturers should come up with new lucrative policies like easy availability of loans and flexible repayment schemes so that consumers are encouraged to buy new vehicles."

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