Auto Sales In May

The IIP of April 2012 may have been up at just 0.01 % (YoY) growth but the auto sales numbers in May tell us something else.  The car sales have grown just 3% at 1.63 lac, Motorcycles have registered 7% growth , scooters however have shown remarkable growth of 34% at 2.35 lac.


The scooter sales may have come strong due to fuel cost impact felt in urban areas by shifting some of the demand from cars to scooters. It makes me happy when I find Indians responding to reality in this way. This makes me confident that if and when the market oriented prices for all kinds of fuel will be introduced Indian will adjust beautifully albeit after an initial fuss.


The Nifty which happened to suffer due to S&P’s observation yesterday, did a reversal of direction by closing up by over a percent at 5114. It may be on to bigger moves ahead as may be seen from the advancing sales number for May month at 62025 (up 11%) for commercial vehicles. Growth in sales of commercial vehicles , more than the rest of the categories is a good sign that tells us the economy is beginning to breathe easy after a period of discomfort. The total domestic sales of autos have been up by 11% which should be seen as OK if not euphoric.


The further consolation is that the exports have improved by 5% and should further improve against the back-drop of weaker rupee.  I was talking in past of this kind of welcome effect that rupee weakness has on industry.


I have been a votary of free foreign exchange convertibility as we are a big nation and reasonable big economy where adjustments should happen in due course without every time a govt committee recommending one way or the other at a late stage when the realities have already changed. The so enthusiastic intervention of RBI for rupee price maintenance does not seem to have achieved any worthwhile objective.




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