BOMBAY, 26 November — It is said that when the automobile sector of country starts showing an upturn, it is sure shot sign of the country’s economy recovering. Well, it is based on this assumption that the automobile stocks on the Indian bourses, over the past few weeks have been seeing a lot of buying. Though many of the companies have not been able to report very good performances, the general perception is that the worst is over for the sector henceforth, things would only look up.

Well, we take a look at this optimistic view and analyze whether the Indian auto sector is indeed on an upswing.

The good news is first on the exports front.

Passenger car exports from India increased by 185 percent in October 2001 as compared to the corresponding period last year. The exports of passenger cars were higher during April-October 2001 by 147 percent as against the same period in the previous year. This is due to the massive exports by Ford India Ltd., which exported 17,812 cars in these seven months, thus accounting for about 65 percent of all car exports in the country.

Motorcycle exports witnessed a rise in October 2001 and registered an increase of 30 percent as compared to October 2000. Exports of commercial vehicles dipped to 859 units in October 2001 as against 972 vehicles in the same period last year.

And now we look at the domestic performance. Telco’s Indica has, for the second time, sped past its competitors, including the Hyundai Santro and the Maruti Zen, to emerge the largest-selling car in the eight model compact car segment. And this indeed was a very big surprise for all as the newly launched car of the Tata’s, Indica, was stated to be non-starter, thanks to the various problems in the car. But over the months, Telco has managed to iron out all these problems and looks like now, the customers are happy with it.

And this has been reflected in the latest sales figures too. Driven by the success of its diesel version, Telco has reported a 127 percent rise in sales to 5,325 units in October 2001, compared with the same month last year. However, sales in September were slightly higher at 5,405 units.

This is for the second consecutive month that the company’s passenger car volumes have increased sharply, over the previous year. Zen, which was earlier the largest selling compact car in this segment, sold 4,566 units in October 2001.

And talking about customer satisfaction, there is some news on that front too. According to the 5th JD Power Asia 2001 study, initial vehicle quality continues to improve for the fourth consecutive year in India as new-vehicle buyers report fewer problems during the first three to five months of ownership.

Hyundai Santro, Ford Ikon, Honda City and Toyota Qualis rank highest in their respective segments for initial vehicle quality. Santro’s ranking has improved by 10 percent, while Ford Ikon’s improved by 16 percent. Honda City has moved to top slot in the Premium Mid Sized category mainly due to a decline in the quality of Mitsubishi Lancer. Though Toyota Qualis shows an increase in initial quality problems, it continues its dominance over competing multi-utility vehicle models.

Among the non toppers, Tata Indica has emerged as the most improved passenger car followed by the Maruti Wagon R. The newly introduced Indica V2, included in this year’s study, performs significantly better than the previous version, with an impressive 60 percent improvement in ride, handling and braking related problems. Now that is certainly very good news for Telco!

The Indian government also seems to be keen on promoting this sector. In the Tenth Plan, it plans to set up an Automobile Export Promotion Council, a government-sponsored scheme for R&D facilities and also review the tax structure ruling in the auto sector. The thrust of the growth over the next plan period is also to spur demand and facilitate the financing mechanism for automobiles. The Planning Commission and Finance Ministry are expected to thrash out financing problems for purchase of automobiles in rural and semi-urban areas.

The financial performance of the third quarter will be most crucial and that alone will decide whether or not the Indian automobile sector is on the smooth road to success.