Auto industry to entice customers with new launches in 2011

NEW DELHI - After robust sales last year, the Indian automobile industry seems set to sustain the growth trajectory in 2011 with a slew of new launches, while trying to keep prices competitive even as input costs soar.

According to the Society of Indian Automobile Manufacturers (SIAM), the auto industry clocked sales growth of 31 percent at 14.82 million units in 2010 as against 11.32 million units registered in 2009.

“Sales of passenger vehicles segment grew by 31.34 percent, commercial vehicles segment by 45.24 percent, three-wheelers by 22.03 percent and two-wheelers by 30.51 percent,” a SIAM official said.

Passenger vehicle sales stood at 2.38 million, including 1.87 million passenger cars, 312,953 multi-utility vehicles (MUVs) and 202,834 multi-purpose vehicles (MPVs).

According to SIAM, the robust increase in sales was due to factors like increasing dispensable income, low interest rates and increase in sales base at par with the pre-recession era.

In 2011, analysts predict the sales momentum to continue. Some of them also predicted a growth rate of 20-25 percent in the passenger vehicle segment alone.

“I expect a fast growth pattern in the Indian auto sector with passenger car segment growing at 20-25 percent, two-wheeler segment growing at 12-15 percent and truck segment at 15 percent for 2011,” Amol Bhutada, automobile sector analyst for Elara Securities, told IANS.

While the sales number may favour the auto industry in 2011, companies will have to face a major challenge of rising input costs, shortages of components.

“A major challenge for the auto industry and the component segment will be the rising costs of raw material, while the supply side will stabilise as manufacturers have been adding capacity,” said Vinnie Mehta, executive director, Automotive Component Manufacturers Association of India (ACMA).

Recently, some companies like Volkswagen and General Motors raised prices of their products, while other auto companies also indicated the same due to inflationary pressures on input cost.

“Companies and vendors have been absorbing high input costs and somewhere down they had to pass on the increasing costs,” said Rajiv Mitra of Hyundai Motors which plans to increase prices by 1.5-2 percent.

Maruti Suzuki India, the market leader in passenger car segment, also intends to raise the prices of its products from this month, though the company is still deciding on the percent for hike.

Analysts believe that the hike in prices would not affect the growing sales scenario as companies would be able to pass on the pressures of rising input costs as the demand will be robust in 2011.

“Companies would be able to pass on the raw material and component cost to the customers. It would be comfortable for them because there are good growth prospects,” Bhutada said.

He said the growth in the passenger car segment would heat up as companies would go for new launches to intensify competition in the entry-level sedan and compact car segments.

Last year, auto companies launched over a dozen new cars, led by Mercedez-Benz which introduced 18 new cars and variants, while Toyota placed its entry-level sedan Etios in the market.

The year 2011 may see a rise in demand of eco-friendly cars, backed by government subsidy, and new launches of environmentally friend variants like Mahindra Reva’s NXG.

It is expected that this year will see the launch of 50 new car models and variants.

“The passenger car segment would be very competitive, I expect launches in the entry level sedan and compact segment ranging from Rs.4-6 lakh,” Bhutada said.

An industry source said the competition in compact car segment would intensify with the entry of Toyota hatchback Etios Liva expected in April, Honda Brio and BMW’s luxury compact car Mini.

While customers would be able to avail more choices in the diesel options for the hatchback segments with the entry of Hyundai i10 and GM Beat in diesel variants.

Meanwhile, luxury segment will see entry of Maruti Suzuki’s ‘Kizashi’ sedan. While Mercedes will re-launch its most expensive brand Maybach.