Sales expected to dip 15% - one of the worst monthly falls.
With banks refusing to reduce interest rate on auto loans, car sales are expected to fall by 15 per cent in November — one of the worst monthly falls, at least in the last four years.
Reluctance on the part of leading private banks to either soften interest rates on car loans or ease the stringent lending criteria even after RBI aggressively pruned its key lending rates in the last two months, has led to a major slump in demand for automobiles.
Car makers say the situation has worsened of late with the consumers postponing purchases on the expectation that prices will come down over Finance minister P Chidambaram's recent appeal to the automobile industry to slash vehicle prices.
Last month, the car sales recorded a fall of nearly 10 per cent when compared to the same month of the previous year. "The going has become extremely tough, we do not expect the industry to record any growth this month. We are trying to avoid being in the red too. However, I expect the rest of the car industry to be in the negative in the current month," said Arvind Saxena, senior V-P (marketing and sales), Hyundai Motor India.
Recently, some of the leading auto makers, including Maruti Suzuki, had announced production cuts at its plants. Auto dealers are also at the receiving end of the slowdown. In many parts of the country, dealers, saddled with a huge inventory of unsold cars, are forced to shell out huge discounts, generally from their own account, in order to clear stocks.
"Things have surely started to take an ugly turn. Not only bookings have fallen dramatically, but in some markets they are facing cancellations also. There should be a fall of 15 per cent in overall sales this month. We fear that customers will hold back their purchases to March next year with a hope of an excise duty reduction in the upcoming budget," said S P Shah, president of Federation of Automobile Dealers Association, which is the apex body of dealers in the country.
The car segment posted growth of 3.5 per cent from April to October this financial year as against 13.4 per cent recorded during the seven-month period last year. Apart from October, the segment recorded fall in August and July. Jnaneswar Sen, vice-president of Honda Siel Cars India, said, "All our models, except the new City, are not doing well. Sales have been down drastically, well-to-do consumers are coming into showrooms but are disappointed due to lack of adequate financial provision. We do not foresee a helpful period."
The recent announcements about price hikes by two of the leading car-makers — Maruti Suzuki and Hyundai — have only deterred prospective buyers, believe analysts. Maruti had hiked prices by 1 per cent, while Hyundai had said it will look at a 2- per cent hike, although there has not been any upward revision yet.
The monthly sales numbers, which are handed out by auto companies, display wholesale dispatches from their factories and not the actual retail numbers. Manufacturers have been pushing inventory till the end of last month. Many analysts feel that the current month will pull out a much clearer picture of the turmoil.
"Baring two-wheelers, which may report healthy sales in the northern market, the four-wheeler industry will report flattish to negative growth this month. Last year in the same month, the segment reported good sales, which means that there will be high base to match with," said S Ramnath, auto analyst, SSKI Securities.
Friday, November 21, 2008
Growth target of 8% possible: PM
Prime Minister Manmohan Singh today assured that industrialists that notwithstanding the global economic crisis India would be able to achieve a growth target of 8 per cent.
Speaking at the two-day Hindustan Times leadership summit, Singh said: "I give you my assurance that despite an adverse international environment, India has the ability and capacity to achieve about 8 per cent growth target."
He, however, said that amidst a deep global crisis we can not pretend that we are not effected. Looking back, Singh said his government had anticipated the slowdown and made provisions for coping with it in the last union budget.
He said the provisions for decent agriculture prices, social safety network like the national rural employment guarantee scheme and implementation of the pay commission report had been some of the farsighted moves of his government.
Holding out assurances, Singh said that his government would mobilize all instruments of policy be it fiscal policy, exchange rate, monetary policy or public investment policy to "see that shortage of demand is neutralized to the maximum".
He asked the industries to have confidence in the system and opt for working with the government in coping with the current situation. "No instrument would be spared to support the growth of enterprise,’’ he said.
The PM promised "liberal credits and bringing down the cost of credit" to help the small and medium enterprises (SME), exporters and labour intensive enterprises, which, he said, "often get neglected" during the policymaking.
Singh, however, said that government was worried that large scale layoffs should not become the order of the day in the industry. "I assure you that the government is committed to see that the ship of Indian industry is not left in the choppy waters but sails with dignity."
On the global financial crisis, Manmohan Singh said that recent G-20 summit in New York had paved way for larger role of India and other developing countries in the Global Financial Stability Forum.
The PM said that he was reluctant to attend the summit as all previous such meets had merely proved to be "breakfast and dinner-eating occasions". He, however, attended it after getting assurances of a meaningful meeting with the US President George Bush.
However, he said this time, at G-20, for the first time the developing nation’s voice was heard with respect.
Speaking at the two-day Hindustan Times leadership summit, Singh said: "I give you my assurance that despite an adverse international environment, India has the ability and capacity to achieve about 8 per cent growth target."
He, however, said that amidst a deep global crisis we can not pretend that we are not effected. Looking back, Singh said his government had anticipated the slowdown and made provisions for coping with it in the last union budget.
He said the provisions for decent agriculture prices, social safety network like the national rural employment guarantee scheme and implementation of the pay commission report had been some of the farsighted moves of his government.
Holding out assurances, Singh said that his government would mobilize all instruments of policy be it fiscal policy, exchange rate, monetary policy or public investment policy to "see that shortage of demand is neutralized to the maximum".
He asked the industries to have confidence in the system and opt for working with the government in coping with the current situation. "No instrument would be spared to support the growth of enterprise,’’ he said.
The PM promised "liberal credits and bringing down the cost of credit" to help the small and medium enterprises (SME), exporters and labour intensive enterprises, which, he said, "often get neglected" during the policymaking.
Singh, however, said that government was worried that large scale layoffs should not become the order of the day in the industry. "I assure you that the government is committed to see that the ship of Indian industry is not left in the choppy waters but sails with dignity."
On the global financial crisis, Manmohan Singh said that recent G-20 summit in New York had paved way for larger role of India and other developing countries in the Global Financial Stability Forum.
The PM said that he was reluctant to attend the summit as all previous such meets had merely proved to be "breakfast and dinner-eating occasions". He, however, attended it after getting assurances of a meaningful meeting with the US President George Bush.
However, he said this time, at G-20, for the first time the developing nation’s voice was heard with respect.
Govt mulls Rs 75,000 cr refinance window
The government and Reserve Bank of India (RBI) are working on opening a massive Rs 75,000 crore refinance window to provide concessional funds for infrastructure, housing and small and medium enterprises (SMEs) by partly leveraging the country’s foreign exchange reserves.
The broad plan is to provide refinancing through India Infrastructure Finance Company Ltd (IIFCL), the government-owned special purpose vehicle set up in 2006, National Housing Bank (NHB) and Small Industrial Development Board of India (Sidbi), a senior government official said.
Funds to these institutions will be available at 7 to 9 per cent to enable banks to earn a decent spread but cap lending between 10 and 11 per cent (see table), significantly lower than current prime lending rates of 13 to 17 per cent.
The announcement of this special financial window, which is expected at the end of this month, is designed to send a powerful signal to banks to lend to sectors that are considered key to economic growth. “In my view, they need such institutionalised signalling,” a senior government official said.
India is expected to grow at 7 to 7.8 per cent this year against two consecutive years of expansion at 9 per cent.
The largest chunk of the refinancing — Rs 50,000 crore or $10 billion — is being earmarked for infrastructure by leveraging India’s forex reserves. “Allocating $10 billion for infrastructure will do more to increase our credibility than the implicit reduction of usable reserves by that amount would do to reduce our protection from external shocks,” a government official commented.
Under the plan, RBI will buy bonds worth up to $10 billion from IIFCL’s London subsidiary at a coupon of 2.5 per cent, the same rate it earns on its reserves. India’s reserves currently stand at $251.4 billion.
Since IIFCL will provide banks with refinance at 9 per cent, the 6.5 per cent spread it earns by doing so is expected to cover possible exchange losses. Critically, the government, however, will bear any exchange loss beyond this percentage.
“We should agree to this arrangement in view of exceptional circumstances,” a bureaucrat said. “It may be noted that in circumstances where there is an exchange loss on this transaction, it will be more than made up by valuation gains in rupees on any reserve use,” he added.
The Planning Commission has suggested IIFCL should provide re-finance to banks for up to 75 per cent of the cost of an infrastructure project. This is expected to be a temporary measure, for two years.
The broad plan is to provide refinancing through India Infrastructure Finance Company Ltd (IIFCL), the government-owned special purpose vehicle set up in 2006, National Housing Bank (NHB) and Small Industrial Development Board of India (Sidbi), a senior government official said.
Funds to these institutions will be available at 7 to 9 per cent to enable banks to earn a decent spread but cap lending between 10 and 11 per cent (see table), significantly lower than current prime lending rates of 13 to 17 per cent.
The announcement of this special financial window, which is expected at the end of this month, is designed to send a powerful signal to banks to lend to sectors that are considered key to economic growth. “In my view, they need such institutionalised signalling,” a senior government official said.
India is expected to grow at 7 to 7.8 per cent this year against two consecutive years of expansion at 9 per cent.
The largest chunk of the refinancing — Rs 50,000 crore or $10 billion — is being earmarked for infrastructure by leveraging India’s forex reserves. “Allocating $10 billion for infrastructure will do more to increase our credibility than the implicit reduction of usable reserves by that amount would do to reduce our protection from external shocks,” a government official commented.
Under the plan, RBI will buy bonds worth up to $10 billion from IIFCL’s London subsidiary at a coupon of 2.5 per cent, the same rate it earns on its reserves. India’s reserves currently stand at $251.4 billion.
Since IIFCL will provide banks with refinance at 9 per cent, the 6.5 per cent spread it earns by doing so is expected to cover possible exchange losses. Critically, the government, however, will bear any exchange loss beyond this percentage.
“We should agree to this arrangement in view of exceptional circumstances,” a bureaucrat said. “It may be noted that in circumstances where there is an exchange loss on this transaction, it will be more than made up by valuation gains in rupees on any reserve use,” he added.
The Planning Commission has suggested IIFCL should provide re-finance to banks for up to 75 per cent of the cost of an infrastructure project. This is expected to be a temporary measure, for two years.
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