Indian Car Market: Big Hopes Turn Into Big Disappointment

“Carmakers in India, two years ago the world’s hottest growth market after China, have seen high interest rates, rising fuel prices and prolonged economic gloom turn an industry recently growing at 30 percent a year into one plagued by huge discounts, showrooms full of unsold cars, and chronic overcapacity.”

Car sales in the financial year that ended March 31 fell an annual 6.7 percent, according to data from the Society of Indian Automobile Manufacturers (SIAM) released on Wednesday. Last year, India’s car sales grew a tepid 2.2 percent. Similarly lackluster sales are expected for this year.

At the same time, carmakers are sitting on huge amounts of newly-built capacity. Says Reuters:

“Last month, Tata Motors Ltd’s factory in Gujarat, built solely to manufacture its much-vaunted low-cost Nano, cranked out just 1,282 cars, a miserly 6 percent of total possible capacity at the 250,000 cars a year plant.”

India’s average industry utilization level stands at alarming 55 percent, with more capacity coming on line in the next few years.