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harryccc

Recession down the lane

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Hi All.... I am sad to say that the Business side of the year 2008 is expected to be sluggish. There are too many reasons spotted behind this and reasons are only adding more. So will this affect our Car market in India?

Nano is expected to be released and the used car market has already started to feel the pinch.

 

So if economic recession will reduce the new car sales, less demand means more price, so if someone is planning for a trade in, he will loose more money while selling his old car and pay more while buying a new car!!!

 

What say ppl?

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Yes the US sub-prime crisis will have global repercussions. The US Fed has decreased the prime US interest rates by 0.75 % today, to ward off the impending recession and the global stock markets are looking up a bit.

Recession in the US will harm the world's car industry the most. The luxury car sales worldwide will be affected to start with.

Coming to Tata and the Nano, the Tatas are looking for a $3 billion loan to finance the JLR buyout.In the hard hit money markets the loan will be costlier and over and above Tata has now a lower credit rating at BB+ owing to the fact that the JLR takeover may strain the company's balance sheets (JLR is a loss making entity).

In the light of this, the Nano launch comes in the third quarter of 2008. Lets only hope that the Nano is a grand success. But it is a historically proven fact that selling people's cars is no good way of earning huge profits. The real money and profit lies in the sale of the luxury cars.

anjan_c20072008-03-19 13:44:24

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there are also news that Indian IT Industry slow down is expected this year due to which companies decided to reduce the employee compensation package, yearly appraisal rates and also layoffs in a very minimum scale expected! however this will also directly hit the other Industries as well like real estate, car industry, retail etc.... So a word of caution, please postpone any purchase a little unless there is a diring need for it! be very careful while selling used cars, anyways this has to be done at the earliest since there is a negative market expected and price will fall to a greater percent.

Please think twice before executing a purchase or sell but certainly not much enough to panic... Happy motoring as always!!!
harryccc2008-03-22 10:34:09

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Hi All.... I am sad to say that the Business side of

the year 2008 is expected to be sluggish. There are too many reasons

spotted behind this and reasons are only adding more. So will this

affect our Car market in India?

Nano is expected to be released and the used car market has already started to feel the pinch.

 

So if economic recession will reduce the new car sales' date=' less

demand means more price, so if someone is planning for a trade in, he

will loose more money while selling his old car and pay more while

buying a new car!!!

 

What say ppl?
[/quote']

Errmm Harry i think u've got the demand price relationship wrong.... if

there is a slump in demand the prices actuall are going to fall... but

one thing you can't predict at this time is the movement of interest

rates..... because on one hand there is less economic activity 

and on the other hand there is high inflation.... lowering interest

rates will result in a higher inflation... so it's actually a catch22

situation..... in my opinion the best time should be early next year or

something by which time all the 'bad' blood will be taken out of the

system and we'll be some what near the 'end' of the recession which

will be the most conducive period for consumers especially with low

interest rates and low prices...

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We are now cribbing. When we were getting 60%+ annual returns over the past few years we were happy. Bull markets do not last forever. A major correction was being forecast - but then these were forecast as early as when the sensex was 6000. Only the corrections and the pace f these in our market have been savage, to say the least.The drop last week was essentially due to Bear Stearns liquidating their entire India portfolio.

One can argue that even a 7% growth is not exactly a recession hen the rest of the world is looking at -1% to +0.7%.

As for predictions even Warren Buffet is not correct all the time!

With harsh times ahead (or at least not as big a boom as over the past few years) elective purchases like cars will see a slow down since people will try and delay the purchases. That is all.

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Hi All.... I am sad to say that the Business side of the year 2008 is expected to be sluggish. There are too many reasons spotted behind this and reasons are only adding more. So will this affect our Car market in India?

Nano is expected to be released and the used car market has already started to feel the pinch.

 

So if economic recession will reduce the new car sales' date=' less demand means more price, so if someone is planning for a trade in, he will loose more money while selling his old car and pay more while buying a new car!!!

 

What say ppl?
[/quote']

Errmm Harry i think u've got the demand price relationship wrong.... if there is a slump in demand the prices actuall are going to fall... but one thing you can't predict at this time is the movement of interest rates..... because on one hand there is less economic activity  and on the other hand there is high inflation.... lowering interest rates will result in a higher inflation... so it's actually a catch22 situation..... in my opinion the best time should be early next year or something by which time all the 'bad' blood will be taken out of the system and we'll be some what near the 'end' of the recession which will be the most conducive period for consumers especially with low interest rates and low prices...

 

Hey DD, you are right about the Supply Demand chain... however in the Luxury car segment i think Prices will go high since there wont many buyers, the first thing everyone expects is that car companies reduce the prices to meet their targets but their bottomline will take a huge hit. this condition is possible for small cars because the number of units will get the companies near their target. i think the companies will increase prices in the luxury segment to meet their bottom line by selling at higher prices, since the numbers of unit sales is lesser compared to the small cars! i hope this makes sense!

 

inflation will have more factors to derive from. for eg if the rupee strengthening continues which will get Inflation down, however to achieve the RBI's comfort zone of 5% will still need to have  many other factors under control...

like you said begining of next year will turn out to be the end of bad, hopefully!!!

 

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I laugh my ass off at people who buy and flaunt skodas and other expensive cars on finance. Yes, I know everybody is entitled to choose and buy the stuff they want or crave for, but I get irritated with ignorant consumers who buy to show off. I work in the software industry and I am aware of high attrition rates and I know for sure, that with the current pay rises the people expect there is going to be recession. The very industry I work for is full of these ignorant consumers who love splurging and changing jobs frequently. Ultimately, we are all going to suffer. Just like the Americans did during the dot com bust. It's very important to realize that, most of this growth was fueled by the IT industry.

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i agree with you thermalpaste. India should definetly concentrate more on the Manufacturing and Engineering for an healthy economy. We never had Industrial revolution like China or many other countries had. Take Korea for example, both Korea and India became liberal almost at the same time. However the Korean economy opened up much earlier than ours. Our economy has opened up very late and still there is something to worry. The services industry contributes more than 50% of the GDP, the indutry which you work for.

Though there are not any news about Services industry's fall or decline and the growth of this industry looks steady, but i personally feel the govt should concentrate to work on other industries also. A blooming economy has always been from an Industrial revolution in many countries, except India.

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Our bureaucratic NAM policies had a lot to do with License raj, closed economy and protectionism. We wanted to show the world that we were self sufficient, which we did.

 Korea and Japan received help from the United States. I agree with you on everything except the Korean economy. They opened up because of American help. They used different techniques to promote manufacturing (Japan, Korea and China) like artificially controlling the exchange rates and taxing imported goods. Have you read the book by Lee Iacoca? He's given really good examples on how Japan was unfair during the 70s. And now it's China's turn.

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