Rising Transaction Cost: A threat to sales growth

In 2010/11, domestic vehicle sales are seen rising by 12 to 13 percent but the rising costs could hinder the sales growth. The vehicles sales have shown a growth of 22 percent with car sales showing a growth of approximately 24 percent in the first nine months of current fiscal year. However annual vehicle sales growth in the January-March quarter is expected to be lower compared to the previous quarter's growth, due to the higher base effect.  Pawan Goenka, president of the Society of Indian Automobile Manufacturers (SIAM) commented that if the transaction costs had gone up then the demand would go down. Auto Companies would either absorb the increases or find other ways to compensate, he added. Due to increase in raw material costs Toyota and General Motors have raised prices on some models in January by 1.5-5 percent while Maruti Suzuki has maintained prices. From last January Automobile sales has started picking up as a slew of government incentives to stimulate India's economy out of the global financial crisis-led slowdown took effect. In late 2008 to boost the demand in the slowing economy the government had cut factory gate taxes.

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