Auto Festive demand expected to moderate on fuel, interest rate hikes:: JPMorgan

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Indian Autos
Festive demand expected to moderate on fuel, interest
rate hikes


 Festive demand expected to be weak: The Indian Car market is
expected to witness sedate demand in this festive season given weaker
consumer sentiments driven by higher interest rates and fuel prices.
 We reiterate our view that Maruti (MRTI.BO, Neutral) will face
headwinds over the near term as growth rates moderate and competition
intensifies.
 As per P Balendran, Vice-president of GM India (as per Economic
Times) said “Carmakers generally see a growth of 20% or more in
volumes during the festival season. However, now with unprecedented
hike in interest rates, hike in petrol prices, high inflation, and negative
market sentiments we are not expecting incremental volume of more than
5% during this festival season."
 Since Jul'09, petrol prices have risen by 60% in India and interest
rates have moved up by c 300 bps. This is already impacting demand for
automobiles and we expect sales to be impacted further. Growth rates for
passenger cars have moderated to just 2% yoy given the rising cost of
ownership. Last week’s fuel price and interest rate hike has dampened
sentiments further.