India’s auto industry “continues towards downwards path”

India autos Sept13Car companies are normally optimistic.  You rarely hear them saying that things are saying that things are bad – they prefer instead to focus on how things are just about to get better.

This makes recent statements by India’s auto manufacturers association even more remarkable.  August sales data was announced in a press release headed “Auto Industry Continues Towards Downwards Path”.  But its content clearly justified the gloom.  Every single category of domestic sales was negative, over every timescale.  The association even felt the need to invent a new word, “de-growth”, to describe the situation - obviously feeling that their statement was over-using the words “decline” and “dropped”.

Thus as the chart shows, using manufacturer data from Team-BJP, sales have now declined for 9 months in a row and are back at 2010 levels.  Last year was the first time sales had fallen for a decade.  But now analysts are expecting a second year of decline, with 2013 sales (red square) down 9% versus 2012 (green line).

The current turbulence in financial markets can only add to the problems.  The collapse of the currency, the rupee, to its lowest-ever level against the US dollar means oil and all imported products are more expensive.  This matters enormously for a poor country like India, where GDP/capita is just $1500 (by comparison, the US is $50k).

Manufacturers are already facing operating rates of only 60%, compared to 80% in the boom.  Most are now offering major discounts to try and move inventory.  The fear is that that the upcoming peak buying season during the autumn’s festivals will also disappoint if the financial crisis continues.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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