Slowing Economy Takes its Toll on Vehicle Sales

Car sales down for third month in a row

Contrary to the expectations of revival of auto market in the year 2013, the new year started on a sombre note with sales numbers across segments, barring UVs, failing to enthuse.

The growth story of Indian automotive market is not a fairy tale anymore. Slowing economy, continuing high interest rates on auto loans and the slowdown reaching even the hinterland have all been factors, which are responsible for cars and bikes hitting the speed-breakers.

Domestic passenger car sales were down for the third month in a row in January while commercial vehicles have been in the negative territory all the 10 months of the fiscal. Now, even two wheelers are taking the slow lane. Though scooter sales have grown 17.7% between April 2012 and January 2013, bike sales stagnate with a growth of just 1.43 per cent. Since scooters are a largely urban phenomenon, it is obvious that slowdown has hit the rural markets as well. 

The situation in the case of trucks and buses is precarious and far worse, with both production and sales down in the dumps. The only shining spots right now are utility vehicles, gearless scooters and light commercial vehicles. But these vehicles categories comprise a small portion of the overall vehicle sales value. The industry is, therefore, worried at the turn of events in the current fiscal.

Also, domestic annual car sales are set to be in the negative territory for the first time in a decade with SIAM saying its growth forecast of 0-1 per cent for this fiscal will not be met. In January, passenger car sales fell by 12.45 per cent, the third consecutive monthly decline since November last year, to 1,73,420 units (1,98,079 units).

Between April-January this fiscal, car sales were down by 1.8 per cent to 15,56,283 units compared to the year-ago period; even new model launches have not been able to have any impact on market sentiment.

The last time car domestic sales witnessed a decline was in 2002-03, when they dropped by 2.09 per cent. In the last decade, only once has growth been lower than this – in 2008-09 at 1.39 per cent, when the world economy faced worst recession in seven decades, post-Lehman collapse, plunging financial markets globally.

In January, all passenger car and commercial vehicle majors, except few, in India struggled to notch up decent sales numbers in domestic market. However, utility vehicles stood out amid ruins and sustained the growth momentum, soaring by a healthy 40.7% y-o-y in domestic sales at 49,014 units during the month.

Car market leader, Maruti Suzuki India Ltd (MSIL) just managed to stay afloat with unflattering growth of 2.0% y-o-y in domestic sales at 103,026 units. Total sales of Maruti Suzuki, including exports, were down 1.1% to 114,161 units in January 2013. It was once again the Swift Dzire that saved the day for the company, clocking a whopping 97.5% growth with a sales tally of 17,060 units during the month compared to 8,637 units in January 2012.

The performance of Hyundai Motor India Ltd (HMIL) was no different. The second largest car manufacturer in India registered a measly 1.2% growth in domestic sales at 34,302 units in January 2013. Exports of HMIL were, however, on upswing, posting a 10.8% rise y-o-y to 17,722 units during the month.

Rakesh Srivastava, Vice President (Sales and Marketing), HMIL, said, “The market was subdued on account of macro-economic factors. For Hyundai the year has started on a positive note with growth in its domestic and export sales. The change in price differential between petrol and diesel prices has increased interest in petrol cars, reflecting in the waiting period of models like Eon, i20 and Verna petrol.  Marketing initiatives in the rural markets are bringing volume growth.”

Tata Motors' woes in the current financial year continued in January 2013 with total sales (including exports) diving by 29.5% y-o-y to 61,660 units. The company's domestic sales for January 2013 stood at 57,780 units, skidding by 28.1%.

Passenger Vehicle segment of Tata Motors was the worst hit, as the domestic sales at 15,209 units in January 2013 plunged 55.5% y-o-y.

Tata Motors’ commercial vehicle sales volume in the domestic market during January 2013 stood at 42,708 units, representing an 8.2% de-growth. The situation would have been worse but for the LCVs, which, with domestic sales figure of 33,986 units, posted a 20.6% increase over the same month last year. On the other hand, domestic sales of M&HCVs adding up to 8,722 units were down 52.4%.

Presenting the same picture, Toyota Kirloskar Motor (TKM), General Motors India (GMI) and Ford India were also in the negative terrain.

Toyota Kirloskar Motor, posting domestic sales of 13,329 units in January, was down 23.4% y-o-y. Sandeep Singh, Deputy MD and COO, Mktg & Commercial, TKM, said “The market is still witnessing a slowdown, especially the passenger car segment. The prospects for the second half of 2013 look better. The repo rate cut is a welcome step. With the budget round the corner, we are looking for some more measures that will bring about positive growth.”

Ford India sold 7,115 units in domestic & overseas markets, which reflected a steep 34% decline from 10,786 units a year ago. Sales in Indian market, reading 6,062 units, plummeted by 33.7%, while exports shrank 36.1% to 1,053 units in January 2013.

“Despite a tough business environment with hike in fuel prices and ongoing high interest rates, consumer interest in Ford vehicles continues to hold steady. Our commitment and long-term expansion strategy for India continue to progress according to our plan,” said Vinay Piparsania, Executive Director - Marketing, Sales and Service, Ford India. 

With Sail U-VA and Sail sedan not exactly setting the sales on fire, General Motors India witnessed a 7.3% drop in its domestic sales to 7,588 units in January 2013 from 8,189 units a year earlier.

Ashok Leyland’s domestic sales in M&HCV segment, reflecting the subdued economic environment, were down 23.6% y-o-y to 6,148 units in January 2013. However, the company’s offering in SCV segment, viz. Dost, continued to make ripples in domestic market with sales of 3,698 units vis-à-vis 1,100 units in the same month last year.

Mahindra & Mahindra, Honda Cars India and Audi India stood up to the slowdown blues, posting impressive growth in their sales numbers.

Mahindra & Mahindra (M&M), continuing its spectacular run, clocked a 32.9% growth in its UV sales in domestic market at 26,555 units during January 2013.

Honda Cars India Ltd (HCIL), picking up steam of late, witnessed a mammoth 206.8% rise in its domestic sales at 5,451 units. Model wise break-up of HCIL’s sales during January 2013  was: Brio – 2,336 units; Jazz – 61 units; City – 2,898 units; Civic -53 units; Accord – 73 units; and CR-V – 30 units.

Audi, the German luxury car manufacturer, made a strong start to the year 2013 grossing sales of 737 cars in January 2013. The luxury carmaker recorded a 10.5 per cent growth year-on-year (January 2012: 667 cars). 

While two-wheelers stayed on growth path, the demand sluggishness is starting to set in. 

Hero MotoCorp Ltd clocked an 8.4% uptick in its domestic sales of two-wheelers, which aggregated 547,841 units in January 2013 as against 505,349 units in January last year.

Honda Motorcycle & Scooter India (HMSI) stole the limelight yet again with a healthy 22.3% surge in two-wheeler sales in domestic market at 216,725 units.

Suzuki Motorcycle India and India Yamaha, too, held steady with y-o-y growth of 15.5% and 13.3%, respectively in Indian market, on a small base, though.

While domestic two-wheeler sales of Bajaj Auto slipped 3.1% y-o-y to 196,023 units, the exports tally of 105,338 two-wheelers led the company to record a 2.4% uptick in its total two-wheeler sales during January 2013.

TVS Motor’s sales of two-wheelers in Indian market at 154,107 units were flat, inching up by just 0.7%.

The market scenario at the moment looks subdued with SIAM revising its forecast of vehicle sales in the current fiscal downwards time and again. The silver lining is that headline inflation measured by WPI is moderating. WPI climbed down to 6.62% in January 2013 from 7.18% in December 2012, raising hopes of further rate cut by RBI sooner than earlier expected.

The industry is looking forward to the Union Budget for policy intervention to lift the sentiment and auto market.


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