Car makers driving smooth

In sharp contrast to weak market sentiments - that had predicted auto sales to slow down in the second quarter of FY11, car makers continued their upward journey in October.
Analysts had lowered car sales forecast for October on account of poor agricultural output feared this season, stemming from massive floods along with ballooning car prices. The automakers have jacked up car prices at least twice since the start of this fiscal year.
Yet, surprisingly, domestic passenger car sales (cars, LCVs and pickup) were up by around 12 percent to 13,704 units in October alone, compared to a year earlier - nudging up total car sales volume to 47,391 units in the first four months of the current fiscal year.
But, it seems that higher agriculture commodity prices - as prices of cotton, sugar and rice are on upward trajectory - mitigated the impact of crop losses and pushed the car demand.
The impact of better agricultural income can be gauged from a strong appetite for 1300 cc and above cars, and also Hilux. The demand for these leapt by 9 percent and 69 percent, respectively, in October compared to a year earlier.
Another factor that has been oiling demand for cars is the fear of a massive increase in automobile prices throughout this year, buoyed by a strengthening yen and growing input prices, such as prices of copper, rubber, steel, tin and nickel.
Yen alone has strengthened by an average 14 percent during the first fourth months of the current fiscal year compared to same period last year, and it looks set to appreciate against the rupee in the quarters ahead.
As the price hike is more of a concern for small car buyers, sales of small cars below 1000cc surged by 22 percent in October compared to a year earlier.
However, signs of economic weakness have been rather apparent from the weak demand for commercial vehicles such as trucks, jeeps and buses.
In the presences of demand-breakers arising from tepid economic growth and a lower level of car financing, it would be difficult for the industry to drive sales level to the 2006-07 level. However, modest car sales growth is imminent this year.