Car sales may see slow down next fiscal

Car sales may see slow down next fiscal

Author | Source: The Economic Times | Saturday, Mar 24,2007 8:30 AM

Car sales may see slow down next fiscal

Motown's top-gear run may slow down by 50% in the new financial year and the first signs are already visible in March. According to top auto financiers, the new fiscal should see car sales slowing down to 12-15% from the current trot of well over 20% as the interest increase and price mark-ups pinch auto demand.

Says Kotak Mahindra Prime CEO Sumit Bali: “The slowdown will become visible from April onwards and we expect growth to come down to 15-17% from 28-30% earlier. ”Dittoed HDFC executive vice president Ashok Khanna: “The rate hikes and price increases will definitely impact demand and growth will likely come down to around 12-15%.”

Auto financiers say March, which is usually a good month for car sales due to depreciation demand, is already beginning to feel the hit. “This month has been bad so far,” says Khanna. “The sentiment is down and heavy tax returns have also dampened spirits.”

A company or a business can write off 10% or 20% of the asset if they purchase a car in March. Some even split their car purchases in case of multiple buys to claim 10% depreciation in March and another 10% in September. Bali, for his part, feels March will pick up speed in the last week like 2006.

“March has depreciation demand though it has been rather slow in the last 10 days but it should pick up in the fourth week,” he says. “But the slowdown will be apparent from April.”

Industry experts expect the growth slowdown in new cars to perk up sales in the used car business. “Interest rates have also gone up for used cars but as budgets shrink people are more willing to settle for the latter so demand will be better and growth may not come down,” says Khanna.

Car sales registered a nearly 25% growth in the April-February period this year. Including utility vehicles and multi-purpose vehicles, the total tally was up 23%. The growth pep came after last budget cut excise on small cars to 16%. Last fiscal, cars closed with 7.5% growth while the entire passenger vehicles market clocked 7.6% growth.

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