NEW DELHI - For the first time since India became an open market in 1992, not one automaker increased sales in 1998. General Motors, Ford and Daewoo, all which have made large investments in India, were hammered especially hard, and even market leader Maruti Udyog fell 3.6 percent.
Overall, India's light-vehicle sales dropped 6.7 percent last year from 1997, to 402,409 units. Sales in 1997 had increased 10.7 percent.
Maruti Udyog's decline was the first drop in the company's 15-year existence. Even in 1992, when the country suffered a severe economic slowdown, Maruti Udyog was still able to post a 2.5 percent increase in sales.
However, Maruti Udyog maintained its leadership with 83 percent of the market, but that was down from 83.6 percent in 1997. To spur sales, Maruti Udyog announced late-1998 price cuts for its popular models - the Maruti 800, Omni van and Zen - and it introduced a less expensive version of the Zen.
Blame the economy
Despite the introduction of many new cars and price slashing, India's car market reflected the country's economy, which took a beating. In the words of Manmohan Singh, the former finance minister who initiated a program of economic liberalization in 1991 under then-Prime Minister P.V. Narasimha Rao: 'The industrial growth rate continued to slide month after month, exports collapsed, foreign investment flow declined. There was a net outflow in foreign institutional investors' accounts.'
DNM Hindustan Motors, the No. 2 seller in 1998, sold 20,109 units, a 18.6 percent drop from the previous year.
Daewoo Motors India was the third-highest seller with sales of 8,551. However, it was off 16.7 percent.
Both General Motors India and Ford India fared badly, with sales plummeting 68.6 percent and 61.3 percent, respectively. Sales at General Motors India fell to 3,213 units. Ford India sold 3,542 vehicles in 1998.
Among other automakers in the market, Premier Automobiles sold 4,419 vehicles, a drop of 69.6 percent.
In the super-luxury segment, Mercedes Benz India found buyers for 1,349 cars last year, compared with 2,893 in 1997, a drop of 53 percent.
But Ind. Auto Ltd., the 51-49 percent joint venture between Fiat and Premier Automobiles, did not perform as poorly as most. It sold 7,147 Uno cars, mostly with diesel engines, not bad for a new market entrant.
Also encouraging was the performance of Honda Siel Cars India, another new name in the market, which sold 8,258 City cars in the mid-sized luxury segment. It faced competition from longtime players Maruti Udyog, Daewoo, GM, Ford and Hindustan Motors, which launched the Mitsubishi Lancer late last year.
The year also witnessed the launch of the Santro by Hyundai Motor India, the Matiz by Daewoo Motors India, the Uno by Ind. Auto and the Indica by Telco.
The year began with a 21 percent price cut on the Cielo by Daewoo Motors India. Even so, the vehicle failed to reach its sales goal. Others to cut prices were Ind. Auto and Premier Automobiles. Maruti Udyog was the last to do so, announcing a price cut just before the Indica was introduced.
Prospects for '99
Early indications for 1999 are that buyers are responding to price cuts. Currently, the wait for a Maruti 800 is more than three weeks.
Maruti Udyog Managing Director R.S.S.L.N. Bhaskarudu expects sales growth of 20 percent to 25 percent this year. After cutting prices, Maruti will explore untapped rural markets.
Shripad Bhat, assistant director of the Association of Indian Automobile Manufacturers, sees a 15 percent increase in car sales.
Montek Singh Ahluwalia, a member of the government's Planning Commission, forecasts economic growth of 7 percent over the next three years. If that materializes, the car industry could show 10 percent growth.
However, carmakers offering diesel engines may face problems selling their vehicles. India's Supreme Court has established a committee to examine the mechanics of banning diesel vehicles in an effort to reduce pollution.