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Auto sector on the move

September 2, 2009

The BSE Auto Index closed 1.3 points lower on Wednesday as investors across Asia remained cautious after the overnight slide on Wall Street.

The Auto Index was the top performer yesterday, gaining as much as 2.45 percent in a broader market that shed 115 points.

Automobile stocks are set to benefit from India’s stimulus measures aimed at returning the country to 8 percent growth, according to a top official in HSBC Funds.

The auto industry was one of the worst hit by the financial crisis but better than expected results by most major auto makers and increase in sales have made the outlook positive for the sector.

Maruti Suzuki on September 01 announced August sales rose 42 percent on year while August exports rose almost 157 percent over last year.

The company today said it was confident of maintaining margins despite competition and that there were plans of pumping $130 million in a research and development unit in India.

The automaker’s shares ended 2.2 percent lower at 1510 rupees.

Rising income levels and introduction of new models by carmakers have contributed to the sector’s recovery.

The small car segment accounts for about 70 percent of total car sales in the country, and is mainly controlled by Maruti Suzuki and Tata Motors.

Tata Motors gained momentum with the newly-launched Nano, which helped the company raise almost $500 million in April through consumer bookings.

The country’s largest vehicle maker yesterday said August sales rose 14 percent on year but exports fell 44 percent from the previous year. Shares in Tata Motors ended 0.07 higher at 518 rupees on Wednesday.

Hero Honda, India top motorcycle maker, reported August sales rose 30.4 percent from a year ago. Shares in Hero Honda ended 1.4 percent higher at 1556 rupees.

New trends

India with its vast resources, skilled labour and untapped market makes it an attractive destination for global automakers planning a local hub.

Toyota Kirloskar plans to make India an export hub for small cars by 2012.

Nissan Motor too is expanding in India with its Renault-Nissan passenger car project. The company expects to capture more than 5.7 percent of the Indian market by 2012.

Toyota, Ford, General Motors and Volkwagan are all set to launch small cars in India next year.

Festive season

The next two months will be crucial for automakers with Navratras in September and Dussehra in October. Automakers usher well during the festival season in India as purchasing of vehicles during this period is considered auspicious.

Do you think the drought-like situation in the country poses a threat to the auto industry or will it cruise along and touch new highs?

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