Indian automobile sector register highly impressive sales in January.

Most of the automobile companies have put a very commendable show. Indian car makers seem to be on an all time high with new launches, healthy sales figures, and better car loans etc which sum up the year for the automobile sector in the year 2010.

Sources reveal that, "Demand for vehicles continues to surpass supply. This is despite the fact that most auto majors have hiked prices, passing on the cost impact to the consumers owing to the high commodity prices and changes in the emission norms," Angel Broking analyst Vaishali Jajoo wrote in a recent report while analysing the steady growth in car sales.

"A normal monsoon season, improving consumer sentiment and an overall recovery in the economy should benefit auto sales," Macquarie analyst Sanjay Doshi said in a research note a few months back.

The New Year has bought a lot of insights and will be a much better year in the automobile sector.

Sources reveal that, “The auto ancillary industry gets demand from OE (Original Equipment) manufacturers and the replacement market,” Avinash Gupta, Vice President Research Equity, Bonanza Portfolio said that, OE demand is dependent on the number of new cars sold and the replacement market is dependent on the age of vehicles and number of vehicles. Whilst demand from the replacement market is expected to be good demand from OE manufacturers may face a bit of pressure. “The OEM market growth numbers would moderate a bit because of base effect,” said Gupta.

But overall, regardless of the rate of growth in the auto sector growth per se will be there. Rising industrial production, credit, and consumer confidence will all lead to a demand for autos and consequently for auto ancillaries.

And yes the global markets, which had taken a beating in the wake of the 2008 crash are expected to bounce back at least as far as automotives go. “The growth will be boosted by exports as global automotive demand picks up in 2011,” said Bansal. “The demand in the developed world is going to pick up, and in that case the demand from overseas would also come back to the industry,” said Gupta.

There are various new facets that will be coming into the industry in 2011. According to inputs from Fitch Ratings the growth momentum that started in 2010 will continue in 2011. Original equipment manufacturers would resort to aggressive marketing to get market share.

The replacement market will also contribute substantially to growth. In 2010 a combination of capacity constraints as also strong demand from OEMs mean that this demand segment will also be a focus for growth for the auto ancillary segment in 2011.

There are however some hurdles that the industry will have to face and of these imports are one. “The international trade policy that India has entered into/is negotiating with many of its trading partners could make the domestic auto sector highly competitive over the medium term. These trade agreements aim to reduce trade barriers and promote free trade across partner countries,” said Bansal.

Interest rates for vehicles have been on the rise and are currently hovering in the 15 to 17 per cent bracket. But even this will have a minor impact on the industry. “The interest rates have a significant impact in case of commercial vehicles and tractors. The effect in the personal vehicles segment is relatively smaller. The ancillary industry would be impacted accordingly,” said Gupta

Source: http://www.rediff.com/business.com /http://www.afternoondc.in