The Valentine month didn’t prove lovely to the Indian Automotive Industry and almost all manufacturers suffered except the Big 3! (say Maruti, Hyundai & Mahindra). The outliers otherwise were the Renault-Nissan partners who could project some growth apart from the Top 3 players. In the premium brand stable, Merc leads the race again and is growing strong with a strong lineup of new launches and aggressive network expansion. However, the biggest dampener in Feb’16 proved to be the Union Budget – Prices of new cars are set to increase with a new infrastructure cess imposed on the industry. The budget proposes a 1% infrastructure cess on CNG, LPG and petrol cars; 2.5% on diesel cars and 4% on vehicles with ‘higher engine’ capacity. Though the so called ‘cess’ is touted to be used in improving country’s Road & Transport infrastructure; the idea seems to penalize customers for purchasing cars. As per the plan laid by the Finance Minister, Transportation Sector seeks the highest investment in this fiscal’s budget. Seeing the chart, the increased investment surely seems to be coming out of the pocket of new car buyers –
The sales figures mentioned is offtake data (cars billed from OEM to dealers); it is expected that the dealers would have piled up their stocks anticipating the price increase and hence the actual performance may be much different (read lower than the seen numbers). March traditionally is positive for the Automotive Companies, but the increase in prices will surely affect the consumer sentiment and it will be a tougher road ahead for the industry. However, we have faith on the government’s plan and expect the Road Infrastructure to improve in next 6-9 months which will in turn breathe life to the sector.