The Remarkable Indian Automobile Industry

Swaminathan S. Anklesaria Aiyar has an article in Economic Times on India’s remarkable emergence as an exporter of automobiles. Mahesh Vyas has an article in Business Standard on the recent rebound in automobile production and sales. And, here’s the link to the CMIE website on cars.

It’s interesting to look at (seasonally adjusted) US data for sales of automobiles. Possibly helped by the cash-for-clunkers program, this data shows a strong bounce, back to the levels seen in early 2009. Click on the graph to see it more clearly:

Giovanni Veronese emailed me a fascinating graph, with seasonally adjusted data for Indian commercial vehicles. Click on the graph to see it more clearly. This is not quite comparable with the above, since it pertains to commercial vehicles and not cars. And, Indian exports are unlikely to have benefited from the US cash-for-clunkers program. All the three lines on the graph are seasonally adjusted levels, indexed to 100 for the production of January 2005. The red line is for Indian exports. It shows a very high rate of growth – a roughly 50% rise over the period from 2005 to early 2008. This is the incredible rise of India as an automobile exporter, the story told by Swaminathan S. Anklesaria Aiyar. Unlike sales of cars in the US, this has not recovered to pre-crisis levels.

The green line is domestic sales. This shows a recovery similar to that seen in the US – back to the values immediately before the crisis, but without a cash-for-clunkers program being run by the government.

The blue line is automobile production. It shows savage cuts in production executed by the industry when the financial crisis appeared. This was unlike the standard script for downturns as we know them, where firms generally build up inventory when sales slow down. This time around, working capital financing in order to hold inventory was hard to find. I also think that the headlines and television dramatisation of the early stages of the downturn, accompanied by sharp movements in the prices of securities, were useful as an early warning system. This triggered off action by CEOs well before the full bad news came out through sales. As a consequence, there was very little inventory in hand, and production bounced back nicely when sales came back.

If the three indexes had continued to grow as they had done pre-crisis, then all three would have been roughly at values like 200 today (i.e. one doubling ahead of the values of January 2005). Instead, we’re back to the pre-crisis level of 150.

It is really important to do seasonal adjustment, and then eyeball time-series of seasonally adjusted levels, in order to understand what is going on with these series. We’ve been updating a set of series every Monday morning, and releasing these as a public good.

1 comment to The Remarkable Indian Automobile Industry

  • sandeep sharma

    Mahindra & Mahindra Ltd. (M&M Ltd.), a part of the US $6.3 billion Mahindra Group, today announced record breaking domestic auto sales of 27431 units for the month of September 2009, as against 24481 units in September 2008, an increase of 12.1%.

    The total UV sales in September 2009 which includes the Scorpio, the XYLO, the Bolero and Pick-Ups stand at 21961 units as against sales of 16059 units in September 2008, which is a growth of 36.8%.

    Mahindra’s YTD domestic sales stand at 132522 units in September 2009, as against 116971 units for the same period last year which is an increase of 13.3%.

    The company sold a total of 28434 vehicles (Domestic + Exports) in September 2009 as against 25630 vehicles sold in September 2008.

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