Import of cars runs out of fuel - Views on News from Equitymaster

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Import of cars runs out of fuel

May 23, 2000

The demand for imported cars in the domestic market has been on the decline over the last couple of years. The reason being the wide variety of choices available currently to the Indian consumer. Many foreign car companies are manufacturing their top brands in India and these are available for sale in the domestic market. Hence consumers prefer these domestically manufactured cars due to lower prices as compared to their imported counterparts, easy availability of spare parts and a wide choice in each segment. The only segment of imported cars which are still in popular demand are the sports utility vehicles. Another factor which has lead to lower imports of cars is that many of the imported cars do not meet the Euro II norms.

However this fall in imported cars is not a deterrent for many foreign players to import their models as completely built units. The ban that exists on automobile imports is expected to be lifted in 2003, this will allow the foreign car companies to import their cars as completely built units and hence help them to improve margins as their volumes increase. This would also improve the availability of spare parts in the premium car segment which has been facing low volumes due to lack of this.

Passenger car sales
Year Unit nos. % growth
FY95 264,822 -
FY96 345,486 30.5%
FY97 410,992 19.0%
FY98 417,736 1.6%
FY99 409,624 -1.9%
FY2000 639,000 56.0%

On the whole the passenger car segment has been doing well over the last couple of years and volumes have picked up considerably. The main drivers for this have been easy availability of auto loans, 100% auto finance available currently as compared to only 70%-80% earlier, migration from two wheelers to passenger cars and financing options available for second hand cars. Over the past year the pick up in the economic scenario and reduction in dealer inventories have boosted car volumes.

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