Bumpy road ahead for auto industry!

The auto industry is slowing down. In the first two months of the year, two-wheelers, cars and commercial vehicle growth eased. It is a bumpy road ahead

Carmakers will remember 2006 fondly - that is, until interest rates began to harden! Between April and December last year two-wheelers grew 20%, while the figures for commercial vehicles, or CV was 45% and that for cars was 18-20%. Then came the pain. Commercial vehicle growth slowed to 32% in the first two months.

"There will some downturn in the CV industry, but we have grown in the medium duty vehicle by 30-40%. This is an unprecedented growth in this financial year" says Vinod Dasari, COO, Ashok Leyland

In the short term, that may not happen. Analysts expect commercial vehicle profitability to fall to 15-20%, largely on tighter accessories supplies. But car and two-wheeler makers face a different music. Most analysts are projecting 12% growth for cars, while the figures for the motorcycles are 12-15%.

"We will see slowdown but we will be able to beat it" feels Sanjiv Bajaj, ED, Bajaj Auto. So two-wheeler makers are trying to boost sales with discounts and freebies like Hero Honda's World Cup offer, while carmakers are partnering auto financiers to cut car loan rates.

Kotak Mahindra Bank and ICICI Bank have reduced car loans by 0.5%. But even while carmakers work to keep financing at the minimum, competition will eat into margins. Fond memories might stay with last year.