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Happy days are here again for MoTown: Auto cos

The News International Team

Auto companies finally seem to seeing light at the end of a prolonged tunnel of economic slump.

According to latest data released by the Society of Indian Automobile Manufacturers (SIAM), car sales have grown for the fourth straight month in August , indicating a lasting turnaround.

“The auto industry is seeing a gradual increase and even the cumulative numbers are seeing improvements month-on-month …We can see a slow turnaround happening,” said SIAM director Vishnu Mathur, adding that sentiments have played a major role in sales growth. He feels the car segment should end the fiscal year with high single-digit growth.

A slew of new launches, witnessed over the past few months, and an expected extension of the excise duty cut have been backing the story of a revival in MoTown. Moreover, the upcoming festive season may further boost demand.

According to a UBS survey of 40 dealers across India in August 2014, 88 percent of them expect an improvement in sales over the next two months, while 12 percent expect sales to be flat.

RC Bhargava, Chairman, Maruti Suzuki India , however, cautioned that it may be a bit too early to celebrate even as the signs were encouraging.

“I think it is too early to say that there is growth across the board in the automobile sector. Some companies are doing better than others; that is all I can say,” Bhargava told CNBC-TV18.

When asked about car segments that will drive growth going ahead, he said: “Entry-level sector is growing better than it has done in the past and the sector above that, the B-segment is also doing better than what has been achieved. So, these are the main sectors which will drive growth for sometime to come.”

Reliance Securities, which recently launched its coverage on the Indian auto and ancillary sector, is overweight on the sector.

“We believe that India is in the midst of a cyclical upturn in auto and auto component sales. We also believe in the long-term structural opportunity based on out top-down analysis and comparison with various countries in the developed and developing phase. We expect all categories in the sector to grow at a double-digit CAGR until FY2020E,” it said in a latest report.

Reliance Securities report highlights that a rising economic activity, higher disposable income, increasing and young population, urbanization trends, ambitious middle class and improving infrastructure will aid in increasing the country’s passenger vehicle penetration from the current “anemic levels” of 1.5 percent.

Ravi Pisharody, ED-CV Business Unit, Tata Motors , feels the scenario is much better than what it was last year.

“We have already seen some recovery in the last four-five months. The car industry is growing and the medium and heavy commercial , which had gone through a very terrible time for the last two-and-a-half years, has started growing, albeit on a low base,” he told CNBC-TV18.

Pisharody feels the statements made by the government specifically in the area of investments in road transport and overhauling of the Motor Vehicles Act, if implemented will give a big boost to the economy as well.

“There is a strong link between the auto industry and economy. So we do expect if all those things are carried out (whatever the government has been saying)… I think we know from the pulse, all this dust have a pay off in the auto industry,” he said.

Posted by Kankana Roy Choudhury

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