Recession cripples Indian auto industry

By siliconindia   |   Tuesday, 23 December 2008, 22:46 IST
Printer Print Email Email
Bangalore: The sliding economy has bruised the Indian auto industry with sales dipping and many joint ventures being put on hold. "The complete lack of consumer finance and high interest rates are putting off consumers from buying vehicles," says Dilip Chenoy, Executive Director of Society of Indian Automobile Manufacturers (SIAM). In November, the sales of passenger cars plunged from 103,031 to 83,079, while truck sales dropped by half, the worst in 10 years. Infact, the Japanese auto firms like Toyota (TM) and Honda (HMC) has cut on their sales projections, which resulted in the former slashing its production by 30 percent since November. The firm's Indian arm which is based in Bangalore has halted production for eight days a month at its plant. At Chennai in southern India, Hyundai Motors has also begun keeping its factory closed for a day every week to rationalize production costs. Moreover, as banks are not in the lending mood, the interest rate on car loans is hovering at around 14 percent to 18 percent, up from 10 percent to 12 percent. So, it takes a huge toll on the buyer’s capacity, which has been the driving force of the industry. "It is not just the availability, but the better cost of finance which is the main problem," said S.M. Bafna, Head of Bafna Motors, a leading Mumbai auto dealer for Honda, Tata Motors, and Toyota to BusinessWeek. Hence, witnessing the instability in the automobile market, companies have also delayed their joint ventures. Mahindra Renault, a joint venture between Nissan Renault and auto manufacturer Mahindra & Mahindra (M&M) that makes the Logan sedan (Dacia in Europe) in India had delayed the production by three days. Renault was also involved in delaying its production of trucks with Ashok Leyland, while M&M was involved in eliminating 900 jobs in India and international operations.