Auto Market Running Out of Gas

Car sales decline in February is a 12-year low

The flagging auto market is running out of steam, as the vehicles sales figures month after month suggest.  February was no different, as the story of declining sales repeated itself during the month. What is worrisome is that the slowdown has pervaded all segments, barring UVs.

The worst affected by slowdown blues is the passenger car sub-segment. Car sales in India slumped 25.7% in February, the biggest fall in more than 12 years and the fourth consecutive monthly slide, as sluggish economic growth and downbeat mood continued to weigh on demand.

The auto market in India is expected to see it first decline in annual car sales in a decade as high interest rates and rising fuel costs in Asia's third-largest economy put off buyers in a market that was once making waves across the world with its unstoppable growth story.

Domestic car sales stood at 158,513 units during February 2013 as against 213,362 units a year ago. Car sales are down 4.07% for the first 11 months of the fiscal year ending in March. UVs, yet again, came up trumps with a resounding growth of 34.85% y-o-y, selling 47,859 units in domestic market during the month.

Mirroring the challenging economic environment, commercial vehicles continued to struggle, with domestic sales at 68,388 units dropping by 11.06%.  Bearing the brunt of slowing economy, M&HCVs witnessed a sharp 34.7% fall in domestic sales that stood at 21,498 units in February 2013 compared to 32,933 units in the same month last year. As in the previous months, LCVs, especially SCVs in LCV sub-segment, shored up the sales tally of CVs with a year-on-year growth of 6.7%. Overall, commercial vehicles were down 11.1% during the month.

Two-wheelers that have held steady against odds and sluggish conditions in the past are also losing momentum this time around. Domestic sales of motorcycles fell 4.5% y-o-y in February to 800,185 units. Even scooters that have been growing at a scorching pace could not escape the shadow of slowdown with sales growing by just 2.55% to 243,346 units in February 2013.

Car market leader, Maruti Suzuki India Ltd (MSIL) saw its domestic sales of passenger vehicles fall by 9% y-o-y to 97,955 units in February 2013. All the products in its portfolio, except for Swift DZire, registered negative growth. Dzire, selling 18,316 units in domestic market notched up a robust 21.6% y-o-y growth during the month. With exports growing at 2.8%, the total sales of MSI at 109,567 units in February witnessed a 7.9% de-growth.

Hyundai Motor India Ltd (HMIL), the second largest car player in India did slightly better. While domestic sales of HMIL at 34,002 units were down 7.6%, the exports rising by impressive 37.3% to 20,663 units made good the loss in sales in domestic market. Total sales of HMIL adding up to 54,665 units recorded a 5.7% uptick in February 2013.

The segment-wise cumulative sales of HMIL in February 2013 were: A2 segment (Eon, Santro, i10, i20) - 46,387  units; A3 Segment (Accent and Verna) - 7,722 units; A4 Segment (Elantra)  - 470 units; A5 segment (Sonata) - 20 units; and SUV (Santa Fe) - 66 units.

Commenting on the sales, Rakesh Srivastava, Vice President, Sales and Marketing, HMIL said, “The market was suppressed, as there was drop in enquiries with lower rates of conversions to purchase. The increase in fuel prices negatively impacted the already low market sentiment. We expect the challenge to continue in the next quarter until there is a significant change in macro-economic conditions.”  

Tata Motors stayed in negative territory with domestic sales of its passenger vehicles plunging by massive 69.1% to 10,418 units in February 2013 from 33,730 units a year earlier. Commercial vehicle sales of Tata Motors in domestic market reading 47,584 units slipped by 10.2% y-o-y during February 2013. Domestic sales of LCVs rose by 9.8% y-o-y to 36,955 units. Hit severely by the sluggish economic conditions, Tata M&HCV sales at 10,629 units in Indian market were down 45.0% y-o-y during the month.

Driving in the same slow lane, Ashok Leyland registered a 2.4% contraction in its domestic sales of commercial vehicles, which aggregated 9,513 units in February 2013 as against 9,751 units in February 2012. It was Dost – the company’s offering in SCV segment, which provided somewhat respectability to the sales volume of Ashok Leyland.  The company’s domestic sales volume in LCV segment soared by 86.4% to 3,022 units in February, thanks to the continuing robust demand for ‘Dost’, while M&HCV sales in domestic market declined by 20.2% to 6,481 units from 8,124 units a year ago.

Mahindra & Mahindra (M&M), picking up from where it had left in the previous month, continued its excellent run through to February 2013. M&M registered a 11% growth in its vehicle sales volume (including Mahindra Navistar trucks and exports), which stood at 47,824 units during February 2013, compared to 43,087 units in February 2012. The company’s domestic sales stood at 44,399 units during February 2013, reflecting a 9.7% increase y-o-y. 

Mahindra’s Passenger Vehicles segment (which includes the UVs and Verito) clocked a growth of 14% in domestic sales at 23,421 units in February 2013 as against 20,573 units a year ago.

As in the case of other CV majors, Mahindra Navistar was in negative terrain with domestic sales of its trucks sliding by 19.7% y-o-y to 1,008 units during the month. 

Speaking on the performance, Pravin Shah, Chief Executive, Automotive Division, Mahindra & Mahindra commented, “Our February 2013 performance is reflective of the customers’ preference for our products, for which we thank them.”

Honda Cars India Ltd (HCIL), having grown at feverish pace in the recent past, encountered a bump as company’s domestic sales plummeted by 26.5% to 6,510 units in February 2013 from 8,856 units in the same month last year. The company exported 508 cars during the month. Modelwise domestic sales break-up of HCIL during February is as follows: Brio – 2,916 units; Jazz – 185 units; City – 3,271 units; Civic – 21 units; Accord – 62 units; and CR-V – 55 units.

Likewise, Toyota Kirloskar Motor and Ford India were also in reverse gear, with their sales in Indian market falling steeply year-on-year by 23.4% and 44.1%, respectively. The same was the case with General Motors India that recorded a steep 19.8% fall in domestic sales to 7,106 units from the corresponding sales figure of 8,857 units last year.

One of the most worrisome signals emanating from the market is that the slowdown has started to cast its ominous shadow on two-wheelers as well. All two-wheeler majors, barring HMSI and India Yamaha, were in negative terrain.

Market leader, Hero MotoCorp that has been gradually yielding ground to its erstwhile partner HMSI was on a sticky wicket, its domestic sales dipping by 4.1% to 488,930 units in February 2013 from 509,931 units a year ago.

Two-wheeler sales of Bajaj Auto in domestic market at 178,632 units in February 2013 were down 12.4% y-o-y. However, Bajaj Auto’s exports of two-wheelers surged 14.9% y-o-y to 112,665 units during the month.

Domestic sales of TVS Motor and Suzuki Motorcycle were also in slow lane, declining year-on-year by 6.5% and 9.0%, respectively.

Honda Motorcycle & Scooter India (HMSI) continued to march ahead. The company’s sales tally, standing at 215,144 units in February 2013, clocked an 8.9% uptick over 197,496 units in February last year. Exports of HMSI soared by 56.3% y-o-y to 13,364 units.

Thanks to ‘Ray, the company’s offering in scooter segment, India Yamaha Motor notched up an 18.7% increase in its domestic sales at 32,097 units in February 2013

Among the many indicators of an economy's health, auto sales numbers very correctly reflect the economy's performance. The slowing economy, coupled with stubborn inflation and elevated fuel prices, leading to drop in discretionary spending has dampened the auto market in this financial year. Hefty discounts and attractive loan schemes have failed to lure buyers and revive sluggish demand. 

A recent survey by Emkay Broking with 50 dealers indicates a poor and deteriorating demand environment across all three major vehicle categories. The auto market will have to wait a little longer than earlier expected for demand to pick up





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