Sluggish Indian Auto Industry | Maruti to relaunch Swift, GM to expand

India’s leading passenger car manufacturer Maruti Suzuki India Limited is all set to unveil the new version of its bestselling Swift model when the entire Automobile industry in India is crippling due to economic slow-down.

The new Swift which is scheduled to be launched on August 17, is based on an entirely new platform with new dimensions and added features, is expected to be longer (by 2.4 per cent), lighter and more spacious than the present variant. The new Swift’s petrol variant will run around 20 km per litre, while the new diesel Swift will boast of a mileage of 23 km per litre.

The Indian Automobile industry which got a hard hit because of recent economic slow down has sometimes registered a negative growth. The waiting period after booking a car has also got reduced from earlier more than 60 days to mere next business day for many branded car.

Car manufacturing companies are blaming rising fuel price and costlier auto loans for this sluggish market.

The major banks in India have already hiked the lending rates of auto loans. Very recently, HDFC Bank has increased its base rate from 10 per cent from earlier 9.5 per cent while its PLR has been revised from earlier 18 per cent to 18.5 per cent.  The move by HDFC Bank comes soon after two of its competitors-State Bank of India (SBI) and ICICI Bank-announced hike in lending rates. SBI, the country’s largest bank, has raised base rate to 10 per cent and its PLR to 14.75 per cent while ICICI Bank too has raised its base rate to 10 per cent.

Industry sources said, in India passenger car market is dominated by small cars. Almost 75 per cent of the passenger car market is under control of three majors – Maruti, Hundai and Tata Motors which manufacturer small cars too. With the growing pressure on fuel price and auto loan, the middle class who mainly opt for small cars has restrained themselves which jolted the small car manufacturers.

Apart from these three majors, the overall sales have increased for others. Automobile industry sources opine, these car sales are not much in volume with respect to Maruti-Hundai-Tata putting together. Some of them have entered into India very recently and thus their sales are so minimum to count. Apart from this, some companies are purely into commercial vehicle manufacturing.

Though overall car sales during the last one year has gone down, Maruti claims the sales of two more admired cars Swift and Dzire have gone down because of some other reason. Maruti was gearing up for the revamped model of Swift and so, it has discontinued the production of old Swift while its Manesar plant in Gurgaon where Dzire used to get produced was locked out due to labour problem. Similarly, General Motors has also suffered due to labour problem at its Halol plant in Gujarat.

Maruti’s decision to upgrade its best-selling model can be seen as its attempt to retain and expand its stronghold on the small car segment which has off-late seen a slew of launches by global and home-grown automobile giants.

Meanwhile, General Motors India has announced, it planned to increase production capacities at both its Halol and Talegaon units, investing $500 million over two years. The production capacity at its Halol plant in Gujarat is being expanded from its present 85,000 units to 110,000 units. Production capacity at its Talegaon plan would also be increased. The company has launched its Chevrolet Beat Diesel and eyes a sale of 4,500 units per month despite the sluggish market.

Industry experts believe that the Indian automobile market to remain sluggish. Inflation is rising and the Reserve Bank of India (RBI), the apex bank in India, is expected to hike its repo and reverse repo rates, which will push up interest rates. Much of auto sales are loans-driven and an interest rate hike will affect the market. “We don’t expect the market to take-off before the festival season which starts sometime in late September,” the expert concluded.

[This article has been authored by Abhijit MUKHOPADHYAY, CEO, IDSTPR (http://www.idstonline.com)]