The Indian automobile industry is performing with a consistency cap on its head. It has again plucked off another feather to decorate its growth hat. The automobile sector in India surprisingly did well and outperformed our expectations in terms of sales growth during 2009.When the western economies were struggling to survive their big auto giant’s Indian economy propelled to the path of growth on strong growth of auto sector in India.

The prominent two reasons that turned the growth wheel of automobile sector of India in 2009 were:

• Introduction of stimulus packages

• Reduction in prices by auto manufacturers

• Lower bank interest

• Cheap prices of steel and other commodities have also helped the cost of production of automobiles very much cheap resulting to higher sales and higher profits.

• Lower crude prices also added fuel among the buyers to buy cars and enjoy the cheap ride.

• Festive season was among the most important factor which changed the prospect of the automobile sector.

So in all it can be said that automobile sector had more reasons to smile while others were busy in wiping out the cry.

Production of automobiles increased from about 60,000 units in 2008 to approximately about 80,000 units in 2009.It reveals two stories at the same time one is that Indian auto sector not only managed to maintain the sales figure of 2008 but improved its growth by 33.33%.

If we look into the other economies we find that

• Japan Automobile Manufacturers Association, the nation churned out a total of 859,677 cars, trucks and buses in November 2009, up by 0.5% YoY and marking the first YoY rise in 14 months.

• China made a sales figure 13 million units this year, including commercial vehicles.

• The China Association of Automobile Manufacturers has released a report saying that the country’s auto exports were 40,600 units in November, up 13.43% year on year or 11.87% month on month.

Below is the chart as on September 2009 of global auto productions.

Worldwide Car Sales September 2009

Region September 2009 Total Sales % Change from September 2008
EU+3* 388,136 +6.6
China 1.33 Million +78.0
US 745,997 -22.7
Japan 321,137 +3.5
Brazil 308,718 +19.6
India 129,683 +21.0
Russia 117,981 -58.0

Here also we find comfortable growth figures being posted by Asian economies in automobile sector.

Now a question might come up in the mind of my readers that when US is struggling and have managed to come out of the major downtrend in US auto industry then in 2010 how India and other Asian automobile sectors will sustain.

India is now on e of the hottest destination of auto sector growth.UK and US companies are already in the path of negotiations and various types of partnership projects with Indian companies to enter Indian auto market. At the same time we find that across the globe every one is coming with small car deigns and models to suit the purpose of the common mass of people of any economy. We don’t find those days of big cars and luxury cars in the showrooms of automobiles.

China is among the leader to bring such car models to the world auto market. The car market is growing at a 16% rate annually, despite the depressed first half of the fiscal. And small car growth is the fastest. We will also find a huge amount of provision in the balance sheet of the companies for research and development in the automobile sector. We already found that companies like Maruti, Hyundai, Tata Motors and GM are looking to leverage their local R&D structure. And all these companies are having their eye on Indian consumers.

Now it’s hard to say whether all these designs are coming in to play after Nano got launched. Rising crude prices in 2007 have forced the US car makers to bring electric or bio fuel cars in the market. We can be rest assured that in the coming days US will bring these car models if crude prices rises again to the level of 2007 since US have less funding to pay the huge import bill of crude. So are we going to see a new set of automobiles in the new decade. The ans goes without any hesitation yes. The automobile sector is now on the path of huge revolution where the next generation cars will travel eco friendly and for small family.

At the same time we will get to see a huge number of mergers and acquisition happening in the global automobile sector is the comings days.

• China is focusing on improving the structure of industrial products supply.

• 2 to 3 large auto enterprise groups with the production and sales volume of over 2 million sets will be established in China auto industry.

• As well as 4 to 5 auto enterprise groups with the production and sales volume of over 1 million sets”, there are two important activities on merger, acquisition and reorganization finished in China’s auto industry.

In total what we get to see is that the world automobile sector is on the path of turnaround and India is one of the hottest destinations to find the growth of the auto industry. We will also get new series of automobiles which will not be dependent on crude prices.

Among all these we also found some negative shootouts for the Indian automobile sector.

• When RBI will go for a hike of interest rates cost of borrowing will affect the auto sales in India.

• According to the worlds most precious economist its being expected that US and UK will emerge from the recession shadows and will find growth in economy.

• Now economic growth in these two countries will speed up the demand of crude prices, which will carry the crude towards $100 barrell.

• So consumers will less prune to buying cars at that point of time.

• Commodity prices particularly steel prices are already on the higher tide. This will increase the cost of production of automobiles resulting to increase in prices.

• Cost of tire is among them which have already started increasing.

• We cannot expect the Indian government to continue the stimulus package declared for automobile sector for a longer time at the cost of rising fiscal deficit of India.

• Moreover when so many companies are focusing on India market prices competitiveness will rise to the highest point leading less space for companies to make profit.

It can be said that in 2010 we will get many challenging situation and turn around for the Indian automobile sector followed with US and European economies. The new decade for the automobile sector will bring us a new set of products followed with major hiccups.

Very soon The 2010 Auto Expo will begin in New Delhi which be bigger, brighter and better than the previous shows. The growing number of visitors indicates the rising importance of India as a key automobile destination. One of the prime reasons for such event to become so big is India is a fast-growing market for cars and two-wheelers. Compared with China’s 27 cars per 1,000 citizens, India has only seven car owners per 1,000 citizens.

Indranil Sen Gupta
Financial, Economic Writer and Research Analyst.

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God has been kind and the people with whom I have the journey of my career over the last 16 years have been great fortune to have them as my best friends standing today .Well, I hold more than 16 years of experience in the Financial Advisory, Global Macro Analysis and Business Development Strategy. View Full Profile

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