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Prime factors that affected car sales for 2014

Snapshot: Here are few factors that affected the car sales in India in the year 2014.

The auto industry in India has faced tough times in terms of sales in the current fiscal year. Though there has been a positive sales growth at the end of the year but not in large numbers. The automobile market in India is still rolling under a downturn and is moving towards a slow but sure recovery. There are various factors that affected the car sales in India in the year 2014. Slow economic growth, high interest rates and high fuel prices, low sentiment of the consumer, had a major impact on sales of vehicles during the current fiscal.

According to Society of Indian Automobile Manufacturers (SIAM) SIAM Director-General Vishnu Mathur, "Car sales have increased in the month of November due to lowering of fuel prices and benefits of reduced excise duty continuing." In November domestic passenger car sale figures registered a 9.52 percent growth at 1.56 lakh units, as per SIAM. In the month of October the sale was about 1.43 lakh.

The fuel cost was one of the major reason that affected the car sales during the year. Earlier the gap between the price of petrol and diesel was almost neck to neck, which decreased the sale of petrol cars as compared to diesel cars. With the new government, the bridge between petrol and diesel has widened, as a result people are again opting for petrol cars. It  is the 8th reduction on the trot in the prices of petrol since August 2014, while the diesel prices have been slashed for the fourth consecutive time since October 2014. The main reason behind this deregulation was due to the falling international oil prices. The crude oil prices in June, 2014 were USD 115 per barrel, while now they have slumped to a five-year low at USD 62.37 per barrel. In the national capital, Delhi, the revised petrol and diesel prices are Rs 61.33 per litre and Rs 50.51 per litre, respectively. This is the lowest petrol price in Delhi for the past 4 years and lowest diesel since July 2013. The prices would vary in each and every state due to different rates of local sales tax or VAT. 

The buying pattern of Indian customers has also changed. With the increase in more hatchback models, the demand for sedan and luxury cars declined. Even the sales for utility vehicle (UV) increased at a good rate. Ever since the Honda Mobilio has launched, Honda has been in the top 10 list of best selling cars and about 7000-8000 models are sold every month. Overall, the passenger vehicle sales is estimated to rise by 5-7 per cent in this financial year (SIAM).

The car market is hoping to ensure excise duty cuts continue beyond December 31 2014. “Hopefully, we are on a recovery path. If you want it deep-rooted, interest rate cut is required so that people sitting on the fence start buying,” Mathur said. The current excise duty structure for SUV stands at 24%, which was 30% earlier to the cut, 27% for large cars, which was again 30% before February 2014, 8% for small cars instead of 12% and 20% for mid-size cars instead of 24%. The roll off means that the manufacturers will have to bear the exact same percents as before February 2014.

The brand value of a car also plays a important role in making or breaking the sales. Some exotic brands or even some popular names are known less for reliability and high maintenance cost. Brand like Maruti has the best after sales service. Maruti Suzuki's after sales network reaches across the length and breadth of India. The spare parts and service costs are affordable too. Rated number two in India, Honda is also well-known for producing reliable and refined cars that has resulted in its sales growth. Not only the brand value of a car manufacturer is important, but the cost of the car also plays a vital role.

With the launch of the Maruti Alto K10 in India, it became the most affordable automatic car. The sales of automatic transmission as compared to manual transmission has gone up. People are getting more inclined to AMT.

By studying these factors that affect the car sales in India, we can come to a conclusion that upturn or downturn is due to an aggregate effect of multiple factors. Let's hope a healthy 2015 in terms of sales graphs!!

Stay tuned to Autoportal for instant updates from across the automotive industry!! Happy new year 2015!!

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