Also, weak demand continues for commercial vehicles (CVs), a lead indicator of the country's economic activity. Vishnu Mathur, director general of Siam, said: "Sales of CVs were at their second lowest level in September when considered over a period of 38 months. Even during the Lehman crisis in 2008-09, the PV segment had shown marginal growth. This time, the slowdown has affected both the PV and CV segments."
Sales of CVs fell 27 per cent to 51,680 units last month as against 70,746 units sold in September 2012. "The stoppage of infrastructure projects and in mining has affected the CV segment badly," said Kirloskar.
The slow offtake, triggered by high interest rates, fuel prices and inflation, has resulted in 23-30 per cent excess capacity in the PV segment. In CVs, production for April-September has dropped 11.6 per cent. While permanent workers have not had to bear the brunt of the downturn yet, Kirloskar said employment of contract workers and trainees across the chain in the industry, from component suppliers to manufacturers to dealers, had been "significantly" affected.
Manufacturers are going ahead with planned projects but questions are being raised about the viability of fresh investments. Kirloskar said, "Whatever (projects) has started will be completed; whether new ones will start is a question. We are trying very hard to explain to the government the need for a stimulus package. This ripple effect of this industry on the economy is huge. The auto industry is a major skills-driver in the manufacturing sector."
On the positive side, the good monsoon has sparked demand in rural areas. Sales of two-wheelers went up 18.4 per cent to 1,265,704 units in September as compared to 1,069,069 units sold in the same month last year. According to Siam, motorcycle sales last month grew 17.4 per cent to 885,117 units from 753,693 units a year earlier; those of scooters increased 24.9 per cent to 317,750 units. "Sales grew because of good monsoons, festivals and on the back of demand from rural areas. But we have to see if the growth continues," cautioned Mathur.
Overall, sales of vehicles across categories grew 11.6 per cent to 1,580,254 units in September from 1,415,526 units in the same month of 2012.