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Rediff.com  » Business » Road ahead is slippery for the automobile industry, says Fitch

Road ahead is slippery for the automobile industry, says Fitch

November 18, 2013 12:22 IST

Road ahead is slippery for the automobile industry, says Fitch

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Demand for passenger vehicles, which has been on a downhill so far this year, will continue to remain sluggish through the first half of 2014 due to high interest rates which has weakened consumer sentiment, says a Fitch Ratings report.

Passenger vehicle sales fell 7.1 per cent year-on-year during the January-October period, largely driven by a massive 10.5 per cent drop in car sales.

Although utility vehicle sales rose 7.6 per cent during this 10-month period, that was on the back of strong sales in the parts of the year, the report said.

The image is used for representational purpose only

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Image: Workers stand next to the assembly line of the Hyundai Motor India Ltd plant at Kancheepuram district in Tamil Nadu.
Photographs: Babu/Reuters

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Even demand for diesel-powered utility vehicles declined in the past six months as the differential between petrol and diesel prices narrowed, excise duties in most segments increased, and high interest rates choked consumer borrowing, the report noted and said utility vehicle sales have fallen in spite of launches of popular new models in the last 12-15 months.

The tepid demand has been evident in the recent festive season, which has so far bucked the trend of increased sales seen in previous years.

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Image: Workers walk beside cars ready for shipment at a harbour in Chennai.
Photographs: Babu/Reuters
Tags: Fitch

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The passenger car segment continues to face challenges from the high cost of ownership and slowing economy, which has resulted in poor consumer sentiment, especially in urban markets.

This is reflected in the flat sales registered by the top two car companies -- Maruti Suzuki and Hyundai India -- which account for nearly 70 per cent of the market in the recent festive season.

"We expect the present challenging environment to continue to hurt sales in the near-term, while rising competition and heavy discounting may erode manufacturers' profitability," the report said.

The image is used for representational purpose only


Image: Hyundai cars are ready for shipment at a port in Chennai.
Photographs: Babu/Reuters

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