The Union Budget 2017 has given the auto sector a reason to cheer with the announcements that will have a direct impact on vehicle sales
The auto sector witnessed a mixed fortune in 2016 that experienced growth as well as challenges like uncertainty over the Goods and Services Tax (GST) Bill and then demonetization by the end of the year. The Indian automotive industry stands at $74 billion and by 2026 it is expected to achieve a turnover of $300 billion, clocking a CAGR of 15 per cent, according to the Society of Indian Automotive Manufacturers (SIAM).
Rural Optimism
The beginning of the year proved a mixed bag for the industry as some players reported higher sales, while some witnessed flat or lower sales.
The country’s largest carmaker Maruti Suzuki India logged higher sales number with 144,396 units in January 2017, up from 113,606 units sold during the corresponding month last year. For this month, the company’s domestic sale was up 25.9 per cent to 133,934 units from 106,383 units.
The second-largest carmaker Hyundai Motor India too opened this year by selling 51,834 units in January, up from 44,230 units sold in the same month last year.
On the other hand, Tata Motors passenger and commercial vehicle total sales (including exports) were at 46,349 vehicles, a decline of one per cent over 47,035 vehicles sold in January 2016.
Likewise, Mahindra & Mahindra sold 39,303 vehicles in January this year compared with 43,789 vehicles sold during the corresponding month last year.
“The auto industry continues to see mixed reactions and some of the segments, including the rural market and the commercial vehicles categories, continue to face challenging times,” said M&M President and Chief Executive (Automotive) Pravin Shah.
Going Forward
Sharing his views on the Budget, Rakesh Srivastava, Senior Vice President, Sales and Marketing, Hyundai Motor India, says, “The Budget will give a boost to the economy, especially rural, with a focus on infrastructure creating a robust business environment and thus helping the auto industry and positively contributing to GDP.”
Shah expects the Budget to positively impact the economy and also the industry, especially in view of the emphasis and the allocation made for rural, agriculture and infrastructure. “We are confident that this will lead to a spur in demand,” he adds.
Most of the automakers are betting on rural economy as it accounts for a significant percentage of sales, especially in two-wheelers, tractors and other commercial vehicles. “With almost half of two-wheeler demand coming from rural and semi-urban India, the Budget should have a positive impact for the industry going forward,” believes Yadvinder Singh Guleria, senior vice-president for sales & marketing at Honda Motorcycle & Scooter India.
Clearly, the auto industry is optimistic on budgetary announcements, which they expect will positively impact the economy and also the industry.
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