Policy paralysis hurting car sales, says Maruti Suzuki

The chairman of Maruti Suzuki, the country's biggest carmaker by sales, today said the automobile industry is unlikely to see an upsurge in sales in the next fiscal starting April, thanks largely to political uncertainty that is hampering economic growth.

"The political situation being what it is, how this will help in decision making and implementation is a question mark ... economic growth needs political stability," Maruti chairman R C Bhargava told reporters in Delhi.

He said the auto industry may report some sales growth at the end of this fiscal, but it will not be large as the market is still reeling under a downturn which is affecting the demand for cars, and not much has changed in the past few months that would help spur growth.

"Car sales can only increase when people have more income, people must have the money to run a car. That can happen only when there is economic growth," he said.

Negative factors like high interest rates, fuel prices and inflation needed to be offset, Bhargava said.

"For 2012-13, the auto industry may still see a positive growth but it won't be in large numbers. I don't see the next fiscal being very different from this fiscal," Bhargava said.

He said blaming only the centre for the economic slowdown is unfair and the states would also need to take responsibility for all-round economic growth.

Such has been the downturn that sale of diesel cars, which has been growing the fastest, have slowed down considerably, he said.
While the steps towards deregulating diesel prices were good, this has had an impact on demand as sales of diesel cars witnessed a decline of 5 per cent in February compared to growth of 7 per cent and 9 per cent in December and January respectively, Bhargava said.

"Diesel cars have also lost the high demand," he said; adding however the diesel versions of the company's models Swift, Dzire and Ertiga continue to have waiting lists.

For the April-February period of this fiscal, MSI's total sales stood at 9,43,156 units, up 5.5 per cent from 8,93,592 units in the year-ago period.

Asked if the current market slowdown would force the company to delay expansion of its production facility in Gujarat, he said by the time its new facility comes up in 2015-16, the market would have recovered.

On production cuts, Bhargava said the company would continue to watch market demand and adjust accordingly. MSI had recently announced a one-day closure of its plants at Gurgaon and Manesar in order to reduce inventories of some models.