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Economic recovery may drive car sales by 10%

BS Corporate Bureau

Domestic car sales are expected to accelerate this year to 10 per cent, after a flat market last year. Sales fell 8 per cent from 615,318 in 1999-2000 to 567,728 in 2000-01 and remained almost flat at 570,473 in 2001-02.

The growth projection is based on data compiled by the Society of Indian Automobile Manufacturers.

Its director Pankaj Gupta says the analysis is based on economic indicators - a 6 per cent GDP growth rate, return of investor confidence and an expected increase in consumer spending, and an expansion of the car market profile - which will all translate into real purchases.

While many in the industry may not be as optimistic as Siam, they do not disagree with the fact that there is a latent demand in the market which may explode if the economy works well.

Most heartening is the fact that the economy has remained largely unaffected by the recent social and political disturbances and consumer sentiments have remained positive.

Said BVR Subbu, president of Hyundai Motors India: "Sales for the last quarter of the previous fiscal have been very encouraging. If that sentiment continues, sales will look up this year. I expect it to be as much as 7-8 per cent for the fiscal. But everything depends on external factors, socio-political and economy-related."

The decision of the government to roll-back some harsh Budget proposals will also lift consumer sentiment, he added.

P Balendran, director, corporate affairs of General Motors India, said: "We expect car sales to grow at least 10 per cent during the year as the economy is recovering fast and the consumer is coming back to the retail segment. It is interesting to note that customers are upgrading to better vehicles and the concept of an entry-level car is diminishing. The availability of easy and cheap financing has also encouraged upgradation by existing car owners.

An auto sector analyst with Jardine Fleming said he expects a growth rate of at least 8-10 per cent for cars.

"While there will be technical correction because of the more positive consumer outlook - sales will be driven up as car financing becomes cheaper," he said.

Against a 14-15 per cent interest rates available on a car loan a year ago, rates have crashed to the 10 per cent levels this year.

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