Festival fails to cheer up auto industry, sales down

New Delhi, Nov 10 (UNI) Faced with severe liquidity crunch and high financing costs, all hopes of Indian auto industry to cash in on festive season were washed away with car sales falling for the third time in four months in October, registering an annual drop of 6.6 per cent.

According to the data released by Society of Indian Automobile Manufacturers (SIAM), domestic passenger car sales again went downhill in October, witnessing a 6.59 per cent fall at 98,900 units as against 1,05,877 units in the same month last year.

Motorcycles sales stood at 5,38,353 units as against 6,57,874 units last year, down by 18.17 per cent, while that of commercial vehicles down by 35.95 per cent to 28,027 units during the month from 43,756 units in the year-ago period.

''Whatever steps that were taken up by the government and the Reserve Bank of India to ease liquidity crunch are not sufficient.

They have been used up to correct existing problems in the system and it had not trickled down to the auto industry,'' SIAM Director General Dilip Chenoy said.

Car sales had fallen in July, registering their first monthly decline in three years, and in August, before picking up pace in September.

Sales of trucks and buses slumped nearly 36 per cent with the latest data showing industrial activity expanding at its slowest pace in a decade.

He said October sales were so bad that it had pulled down the cumulative sales growth of the fiscal to 5.64 per cent in April-October from 10.07 per cent in April-September.

''Financing is still a big issue for the auto industry and we are keeping a watch till the end of this month to forecast what growth the industry can achieve this fiscal,'' Mr Chenoy said, adding that for the passenger cars sustaining even a single digit growth would be a challenge.

Earlier this year, the auto body had projected an overall sales growth of 12-15 per cent, which was revised to 8-10 per cent in September.

Sales during the first seven months of the financial year have risen just 3.5 percent from the same period a year earlier.

''The whole issue boils down to tight liquidity. Dealers are not getting money to hold stock,'' Chenoy said, adding that firms were getting profit margins of about eight per cent on cars sold, while interest costs on funds to carry stock were about 13 per cent in October.

Auto manufacturer's profit margins were also getting squeezed by rising prices of steel and other raw materials, forcing firms to lift car prices and curtail incentives to buyers, further souring demand.

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