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Buoyant economy drives automobile sector in FY2000 - Views on News from Equitymaster
 
 
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  • Apr 27, 2000

    Buoyant economy drives automobile sector in FY2000

    As per newspaper reports the automobile sector on the whole has picked up in FY2000, with certain segments like passenger cars showing very good volume growth. The only segment of the automobile sector which has failed to show any improvement is scooters. Scooters sales fell by 5.4% in FY2000 to 1.25 m units sold as compared to 1.33 m units in FY99.

    The automobile sector which was earlier reeling under the effects of a slow economy in FY98 and FY99 has recovered in FY2000. The main factors behind this is a pick up in industrial production which grew by 7.2% YoY for the first ten months of FY2000, and the agricultural sector which grew by 7.2% in FY99 the effect of which was felt in FY2000. As the economy on the whole has picked up and sectors like steel and cement are showing an improvement, this has resulted in buoyant demand for the automobile industry.

    (No. of units sold) FY00 FY99 % change
    Passenger cars 639,000 410,000 55.9%
    Multi-utility vehicles 123,000 111,000 10.8%
    Commercial vehicles 171,000 139,000 23.0%
    Motorcycles 1,796,000 1,395,000 28.7%
    Mopeds 726,000 682,000 6.5%
    Scooters 1,253,000 1,325,000 -5.4%

    In the passenger car segment the growth came from the small car segment with the introduction of Indica in December'98, and the aggressive marketing strategies followed by Daewoo Motors for Matiz and by Hyundai Motors for Santro. During FY2000, Maruti Udyog Ltd however saw a decline in its market share which fell to 62.2% in FY2000 from 80% in FY99. The main reasons for this decline are higher competition in the small car segment and the slow response of Maruti. Late introduction of new models and poor pricing strategy took its toll on the company.

    The luxury car segment did not do very well and international companies like General Motors and Mercedes Benz India saw a decline in their units sold in FY2000. The main reason for poor demand in this segment can be attributed to the fact that spare parts and servicing in this sector is not widely available.

    The good growth in motorcycles has been mainly due to a shift in consumer preferences from scooters to this segment and higher rural incomes. Market leader Bajaj Auto saw a decline in 9% in its scooter sales in FY2000 as companies like TVS Suzuki came out with a new model during the year and others introduced and spruced up newer variants of their scooter models during the year.

    On the whole the buoyant economic growth, stable freight rates, higher rural incomes, pick up in industry performance, reduction in dealer inventories, lower interest rates, availability of attractive finance options, has driven up the fortunes of the automobile sector in FY2000.

     

     

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