Rising interest rate may hamper auto industry growth in 2011

A big question that poses on everyone's mind is if 2011 will continue the momentum the Indian auto market has gained in 2010. The year 2010 accounted for a growth of 31 per cent by rolling out 14.82 million cars which can be accredited to the new cars in the domestic auto market and consumers' increasing confidence and purchasing power. However, now the auto sector is worried that the increasing interest rates and rising commodity prices may affect the growth. It was reported by the Society of Indian Automobile Manufacturers (SIAM).

Dr. Pawan Goenka, the President of SIAM said that the auto market expects a growth of 12 to 13 per cent but a growth of 15 to 16 per cent in the coming five years is likely to happen. The auto sector believes that on the passenger cars the interest rates will be 14.5 per cent and on commercial vehicles it will be 18 per cent. He also mentioned that it is expected that the finance institutions may increase in the coming six months time which is a worry.

The sales of the cars boosted by 30.51 per cent, 13.05 lakh cars were rolled out in December 2010 and the four wheeler sales raised to 1.93 lakh units. The Commercial vehicles grew by 27.3 per cent, selling 61,880 cars in December, 2010.

The last ten years' sales figure shot up to 10.1 million cars which added to the 6 per cent in the gross domestic product. In 2010, more than 12 cars were launched in India and 2011 will observe 50 new cars launches.

The auto biggies such as Tata Motors, Hyundai Motors, Volkswagen AG and Toyota Kirloskar Motors increased the price on its car models from January which will be helping them absorb the commodity prices.

Goenka said that the auto sector believes that the commodity price will increase further with the same rate which will be levied on the consumers.

The problems the auto industry has been facing are constraints in the supply of the raw materials and also increasing interest rates for buying a new car. Also obstacles like constraint in supply of the spare parts from the auto component manufacturer has highly affected the manufacturing of the cars. But 2010 exhibited huge demand from the consumers despite of increasing car prices.

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