The Times of India (Chennai, India) - The Indian auto industry, battling a demand slowdown after top gear growth in 2010, can take heart from the fact that the world's fastest growing auto market and also its largest,is fighting a similar problem. Automobile sales in China have slowed down sharply in recent months. In the first six months of calendar 2012, auto sales clocked a just-under 3% growth which is only slightly better than the 2.5% growth it recorded in 2011. According to auto experts this is undoubtedly China's worst performance in more than two decades.
China's automobile market picked up speed in the late 90s. By the early 2000s, it was already the world's fastest growing market. Like India, as recently as 2010, China's automobile sales growth was a mind-boggling 32%. The troubles in the world economy and domestic price pressures have put the brakes on the Chinese growth story say experts.
In comparison, India still seems to be doing better though the size of the Indian market is miniscule compared to China. For the first quarter of the current financial year, car sales have grown just above 5%. The Society of Indian Automobile Manufacturers, the apex body for the auto industry in India, recently announced a lower growth forecast for the financial year for car sales - down to 9-10% from the earlier 10-12%. India's car industry recorded a very modest 2.2% growth in the last financial year though since then things have improved a bit. In May car sales were up nearly 3% but in June growth had improved to 8%. That's a far cry though from the nearly 30% growth the industry had clocked in 2010 as India's GDP performs its worst in nine years. In India the slump started in June 2011 when car sales growth started falling for the first time in three years and by October last the slump was the highest in ten years.
India's problem has been high interest rates and persistent increase in petrol prices which has unnaturally skewed the market in favour of the subsidised diesel fuel vehicles. Car companies with big petrol capacities had to look for diesel engines and models overnightas the shift was sudden. That plus the increase in excise duty in this year's budget has hit the industry. In China, it's mostly driven by market sentiment particularly since, unlike India, the Chinese market is skewed in favour of bigger vehicles.
