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Indian Stock Market News January 11, 2013

Is Indian Auto story ending?
Fri, 11 Jan Pre-Open

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The Indian automobile industry seems to come a long way since the first car that was manufactured in Mumbai in 1898. The automobile industry is often considered to be a proxy for a nation's economy. Nowhere is this truer than in India today. The growth of the Indian middleclass along with the growth of the economy over the last few years has resulted in a host of global auto giants setting their foot inside the Indian territory. Moreover, India also provides trained manpower at competitive costs making the country a manufacturing hub for many foreign automobile companies.

But the fantastic growth witnessed earlier seems to be fading away. The economy is slowing down, partly because of external problems. Protests and agitations have sapped the government's resolve to take the next phase of reform measures. Policy-making is practically at a standstill. Inflation is galloping. Slumping GDP growth, rising fuel prices and expensive credit have slashed car sales in India, a market that was the toast of the industry two years ago and has attracted billion-dollar bets from global manufacturers hungry for growth.

Society of Indian Automobile Manufacturers (SIAM) has cut its car sales growth forecast for the year that ends in March to 0.1%, its third downgrade this financial year from an initial estimate of 10-12%. Because of the slowdown, many carmakers have started to scale back their investments. For example - The Volkswagen group, Europe's number one carmaker that runs three key brands in India (VW, Skoda and Audi), made its intentions clear that it will not make any fresh investments in India till 2015. The group has cited uncertainties on fuel prices and diesel policy, apart from the poor economic climate, among reasons prompting them to go slow in the market.

This is just one of many instances where auto companies are holding back investments in the sector. The industry is now pinning its hopes on the government to provide them some relief during these troubled times.

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