By Dilip Chenoy

The year 2008 started on a promising note as we witnessed Tata's Nano amidst a slew of launches at the 9th Auto Expo in January in the capital.

As part of the Automotive Mission plan 2006-16, the Government of India introduced several measures to promote India as the hub of small cars. In the Union Budget 2008 - 09, the government reduced the excise duties to 12% from the prevailing 16%, making cars more affordable to the common man.

Despite these incentives and a steady growth rate over the last few years, this year has been difficult for the Indian automobile industry. The industry is expected to register an overall decline of 2 percent in the domestic sales in 2008 over the previous year.

In the early part of the year, increase in the input costs, spiraling fuel prices, hike in interest rates, and lack of finance collectively worked against the momentum of the industry. The current global meltdown and its effect in India have further contributed to a fall in demand, leading to a sluggish market situation.

Yet this year has many positives for Indian industry. It will be remembered for acquisition of British brands Jaguar and Land Rover for $ 2.3-billion in March by Tata Motors among the other acquisitions by Ashok Leyland, Manhindra & Mahindra, Eicher as well as the opening of the TVS plant in Indonesia, the Bajaj stake in KTM and also the number of new joint ventures announced by Hero, Eicher, Hindustan Motors.

We would expect the automobile industry to remain more or less the same in 2009. However, with the advent of CENVAT cut and fuel prices coming down, the industry is likely to revive by the second quarter of next fiscal. But the CENVAT cut alone cannot propel the growth of automobile industry.

We need more corrective measures from Government to spur demand including increased lending, rationalized interest rates and revisiting the demands of the industry in the near term. There is also a need to address the excise duty on vehicles across the segments along with host of other positive fiscal steps in the near future.

India can achieve the goals of the Automotive Mission Plan (AMP) if all stake holders align their actions.

Note: The author, Dilip Chenoy, is the Director General of Society of Indian Automobile Manufactures (SIAM), New Delhi.

The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of SME Times.