Over 6-8% Passenger Vehicle Sales Growth Seen In FY17: Industry Body

New Delhi: Growth in passenger vehicle sales may be higher than the 6-8 per cent forecast for the current fiscal year in view of a better outlook for the economy, a good monsoon and implementation of the Seventh Pay Commission recommendations, the Society of Indian Automobile Manufacturers (SIAM) said on Monday.

Industry body SIAM had in April revised downward the growth forecast for passenger vehicle sales at 6-8 per cent for 2016-17 citing burden of high taxation and unfavourable environment around diesel vehicles. In March, it had already lowered the forecast to 11 per cent from 12 per cent stated earlier.

"There is no recalculation (on growth forecast for passenger vehicles) but we are expecting it to be better than that (6-8 per cent)," SIAM deputy director general Sugato Sen told reporters here.

Explaining the reasons for the auto industry's cautious optimism, he said the economy is expected to do well, monsoon has been good so far and although the interest rates have remained high they are expected to decline going forward.

"Passenger vehicle sales are also expected to increase as the 7th Pay Commission will boost consumer spending and it will positively impact the auto industry," Mr Sen added.

In the April-June period of 2016-17, the passenger vehicles segment has grown by 6.66 per cent at 6,97,154 units as against 6,53,593 units in the first quarter of last fiscal year.

One of the categories expected to do well is the utility vehicles segment with new model launches and competitive pricing in the crossover and compact sports SUVs segments, he added.

The industry, however, continues to face multiple challenge in its pursuit for higher growth.

"The vehicle finance rates are stuck at a high rate and the commodity prices such as that of steel, aluminium and natural rubber are also rising, which will have an impact on the vehicle prices," Mr Sen said.

The average interest rate on car loan is around 14-15 per cent and that of commercial vehicles hovers around 17 per cent.

He further stated that the infrastructure cess ranging between 1 per cent and 4 per cent announced in the Budget has already resulted in higher cost of ownership of vehicles.

In the two-wheeler segment, he said, a good monsoon would result in demand coming back from the rural market thereby increasing sales of motorcycles, as well as sales of scooter in the semi-urban areas.