Business Today

Indian automotive industry shows modest recovery in 2015

Besides an uncertain future on rising fumes over use of diesel for the long term in automotive, the industry witnessed an unprecedented emission scandal involving Europe's largest carmaker Volkswagen that could lead to unprecedented penal fine of up to $18 billion in the US.

twitter-logo Chanchal Pal Chauhan        Last Updated: December 24, 2015  | 18:26 IST
Indian automotive industry shows modest recovery in 2015
SIAM has called for a holistic approach to solve the issue of air pollution in Delhi. Citing an IIT Kanpur study, it said cars polluted very less compared to other factors like dust and burning of paddy fields in neighbouring states.

The Indian automotive industry has finished another calendar year, but 2015 would be remembered more for jitters than any solutions, right from the record number of vehicle recalls to the raging debate on pollution concerns that may well trickle into the new year, which may impact the market for longer.

Besides an uncertain future on rising fumes over use of diesel for the long term in automotive, the industry witnessed an unprecedented emission scandal involving Europe's largest carmaker Volkswagen that could lead to unprecedented penal fine of up to $18 billion in the US.

However, damages in the Indian market was restricted to recall of 323,700 cars of Volkswagen, Skoda and Audi that are equipped with the controversial EA 189 diesel engines and would be inspected for technology change.

While the automotive industry has been on a slow recovery path, several bumps in the fag end unlashed deep pain. The unprecedented rains lashing Chennai - the country's second largest auto manufacturing hub and largest export zone - led to huge production losses for automakers and suppliers.

The manufacturing of various auto makers including Ford, Renault-Nissan, BMW, Hyundai, Ashok Leyland and Royal Enfield were impacted by massive flooding of the city.

The auto industry body, Society of Indian Automotive Manufacturers (SIAM), has estimated a 15 per cent production loss. Besides effects would also be felt in coming months on a massive servicing exercise undertaken by companies to repair a huge pile of vehicles in water logged Chennai.

The silver lining for the industry has been a spate of successful launches. The most successful was the Hyundai Creta that also bagged the prestigious Indian Car of the Year (ICOTY) award, as well as Maruti's new premium hatchback Baleno and French carmaker Renault launching its most successful car in India, the Kwid compact, after its Duster compact SUV created a new set of customers in India.

Scooters continued their growth spree and virtually lifted the sentiments in the entire automotive market, posting the highest growth in the industry. Scooter sales grew 11 per cent in 2015 over the previous year with domestic sales likely to breach the 5 million-mark for the first time ever.

Helped by the surging demand of scooters, the industry has posted 1.5 per cent growth in the January-November period and is likely to sell a record 20 million vehicles in the domestic market.

This is despite the big blow to the sector from the Supreme Court, which has banned registration of all diesel-run SUVs and cars with two-litre engines in Delhi and National Capital Region for three months from January 1 2016, with the aim to curb the alarming rise in pollution levels in the city.

While the move would directly hit indigenous automakers like Tata and Mahindra that are heavily dependent on diesel, it would also impact luxury carmakers like Mercedes-Benz, Audi, BMW and JLR.

SIAM has called for a holistic approach to solve the issue of air pollution in Delhi. Citing an IIT Kanpur study, it said cars polluted very less compared to other factors like dust and burning of paddy fields in neighbouring states.

The continued debate and rising criticism of the industry on pollution has created an uncertain environment for investment and recent decisions could emerge as a major setback for carmakers in India. Analysts tracking the industry say that these sudden policy changes will force automakers to rethink their India product portfolio and expansion strategies in this emerging environment full of ambiguities.

Maruti Suzuki Chairman R.C. Bhargava said the industry prefers a stable policy regime. "The one thing that industry likes is certainty. A stable policy and regime allows continued focus in the market. And when you get into uncertainty, whimsical actions and constant changes, then it becomes very difficult for any industry," Bhargava said in a recent media interaction in New Delhi

The recall issue has also bugged many carmakers like Honda Car India, General Motors, Nissan, Maruti Suzuki and Ford India The big ticket recalls included 2.24 lakh units of Civic and City sedans along with the Jazz hatchback and CR-V SUV manufactured between 2003 and 2012, to replace faulty airbag inflators. General Motors India recalled over 100,000 units of Beat diesel to replace faulty clutch lever. Maruti Suzuki recalled 33,098 units of its small car models Alto 800 and Alto K10 to rectify defective latches on the right side doors.

Nonetheless, the auto market benefitted tremendously on the positive factors like duel benefits of softening interest rates and declining fuel prices. In the January-November 2015 period, overall automobile exports grew by 3 per cent.

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close