Auto Market Remains Lukewarm to Excise Duty Cut

The auto market continued to reel under slowdown in February 2014 despite excise duty cut and consequent lowering of prices by most of the manufacturers. Weak buying sentiment arising out of the uncertainty over economy, coupled with volatility in fuel prices and persistent higher financing cost played the spoilsport and kept the customers off the showrooms.

The only positives emerging from the market were (a) turnaround in passenger car sales and (ii) two-wheelers maintaining their growth momentum. 

Car sales broke a four-month-long declining streak, managing a paltry 1.4% growth in February 2014, for a change, helped by new models and excise duty cut that saw prices come down. Car sales in Indian market during February 2014 stood at 1,60,718 units against 1,58,512 units in the same month last year. However, passenger vehicle segment, as a whole, comprising cars, UVs and vans stayed in negative terrain with domestic sales of UVs and vans declining y-o-y by 9.1% and 32.8%, respectively during the month of February 2014.

Mirroring the sluggishness and uncertainty in economy, commercial vehicles remained in a deceleration mode with domestic sales at 47,982 units falling steeply by 29.8% in February 2014 from the corresponding sales figure of 68,388 units a year ago.

Bucking the trends and weak market sentiment, two-wheelers sustained the growth momentum, clocking a 9.7% uptick in domestic sales that stood at 1,220,012 units in February 2014 as against 1,112,269 units a year ago. Scooter sales continued to make rapid strides with a 28.2% increase in domestic sales, while motorcycle sales in domestic market grew by just 5.4% y-o-y.

Thanks to the significant numbers contributed by two-wheelers, total sales in the Indian market across all vehicle categories and adding up to 1,523,693 units witnessed a growth of 5.0% y-o-y.

Car market leader, Maruti Suzuki India (MSI) registered a marginal growth of 1.8% in domestic sales at 99,758 units in February 2014 over the domestic sales volume of 97,955 units in February 2013, aided by the substantial contribution of its new offering Celerio. Domestic sales volume of Maruti Suzuki in PV compact segment comprising Swift, Estilo, Ritz and Celerio increased by 19.4% y-o-y to 28,672 units. Total sales tally of Maruti Suzuki (including exports) stood at 109,104 units in February 2014, registering a 0.4% drop y-o-y. 

Domestic sales of India’s second  largest carmaker, Hyundai Motor India Ltd (HMIL) aggregating 34,005 units in February 2014 were flat compared to 34,002 units a year ago. The exports of HMIL were down by a massive 39.5% y-o-y to 12,500 units during the month.

Commenting on the February sales performance, Rakesh Srivastava, Sr VP - Sales and Marketing, HMIL said, "Post the reduction in excise duty, enquiry inflow has increased resulting in February sales of 34,005 units. It is expected that this would lead towards creation of a positive momentum."

Tata Motors managed to stem the slide in passenger vehicle sales that turned positive, after a prolonged downtrend, during the month of February 2014. The company sold 11,204 units of passenger vehicles in domestic market, growing by 7.5% in February 2014 over the corresponding sales figure of 10,418 units in February 2013.

On the other hand, hit by the slowing economy and tardy pace of infrastructure development activities, local sales of Tata commercial vehicles remained in negative territory plunging by 49.3% y-o-y to 24,111 units in February 2014.

Another homegrown automaker, Mahindra & Mahindra (M&M) fared equally unflatteringly with total domestic sales of vehicles in its product line-up plummeting by 11.4%            y-o-y to 39,338 units in February 2014. The passenger vehicle sales, comprising UVs and Verito, in domestic market were down 17.6% y-o-y to 19,308 units during the month.  

Pravin Shah, Chief Executive, Automotive Division, M&M said, “The Auto Industry has received the much needed boost in terms of an excise duty reduction and this has resulted in higher enquiries over the last one week. The recently concluded Auto Expo has also been a success which will only help in generating demand. At Mahindra we are hopeful that these positive initiatives would be the beginning of a gradual upswing for the auto industry, as we move into the next financial year.”

Likewise, reflecting the depressed performance of CV segment, domestic sales of Ashok Leyland continued to head southward, falling sharply by 28.2% y-o-y to 6,830 units in February 2014,

Toyota Kirloskar Motor (TKM) reported a 20.8% drop in its domestic sales at 10,100 units in February 2014. TKM’s exports too slipped by 2.9% y-o-y to 1,188 units during the month.

"The excise duty cut is a welcome step taken by the government to revive sales. However, other factors like high interest rates, falling value of rupee and unstable fuel pricing still loom large on the market," TKM Senior Vice- President (Sales and Marketing), N Raja said.

General Motors India was in negative terrain as well, its domestic sales contracting by 21.1% y-o-y to 5,607 units in February 2014.

Ford India and Honda Cars India towered above the rest in passenger vehicle segment.

Ford India saw its total sales soar by 68.9% y-o-y  to 12,253 units in February 2014. Domestic sales growing by a stupendous 51.4% y-o-y on the back of the company’s compact SUV – EcoSport, accounted for 6,799 units.

Honda Cars India Ltd (HCIL), building on the momentum generated by Amaze and new Honda City, witnessed a whopping 123.4% surge in its domestic sales to 14,543 units in February 2014 from a relatively modest sales figure of 6,510 units a year ago.

Model wise domestic sales break-up for HCIL during February 2014 stood as: Brio – 1,235 units; Amaze  - 6,030 units; City – 7,213 units; and CRV – 65 units.

Expressing delight on the company’s performance Jnaneswar Sen, Sr Vice President – Marketing & Sales, HCIL said, “We are happy to see the huge demand for the new Honda City, which has gained the leadership position in its segment from the first month itself. The deliveries for the Petrol City have begun from February and with both our car manufacturing plants in operation, it will aid in quick delivery of cars and cater to the strong demand from our customers. The excise duty reduction announced during Interim budget last month has made all our cars even more attractively priced for our customers.” 

Honda Motorcycle & Scooter India (HMSI) was yet again the pick of two-wheeler market, remaining on fast track with a spectacular performance month after month. The month of February 2014 was no different and saw HMSI grow by a handsome 45.7% y-o-y in domestic sales at 313,523 units. The company’s exports at 14,948 units were higher by 11.9% y-o-y during the month. 

The two-wheeler leader in Indian market – Hero MotoCorp witnessed a marginal 1.2% uptick in its domestic sales at 494,869 units in February 2014 vis-à-vis 488,930 units a year ago. The company’ exports, however, shrank by 24.5% y-o-y to 9,312 units during the month.

TVS Motor Company sold 147,580 two-wheelers in domestic market during February 2014, which represented a 3.3% increase over 142,800 two-wheelers sold in February last year. The company’s exports of two-wheelers rose 25.5% y-o-y to 22,713 units during the month.

Bajaj Auto witnessed a 12.6% drop in domestic sales of two-wheelers to 156,184 units in February 2014 from 178,632 units a year back. The two-wheeler exports of the company were on course, clocking a 4.0% growth y-o-y to 117,139 units during the month.

Suzuki Motorcycle India was another two-wheeler company to record a negative growth during the month. The company’s domestic sales at 25,425 units in February 2014 were down 24.0% y-o-y.

India Yamaha Motor saw its domestic sales jump 32.4% y-o-y to 42,489 units in February 2014.

Mahindra Two Wheelers, part of the USD 16.7 billion Mahindra Group, reported volume growth of 207% y-o-y, selling 18,553 units during February 2014. Domestic volumes stood at 17,848 units, a growth of 217% over the previous year.  

 

It is too early say if the excise duty cut has made any tangible impact to make customers flock to showrooms again. Auto market is yet to see a pick-up or a growth momentum. However, with economy, inflation and fuel prices showing a semblance of stability, there is a cautious optimism that vehicle sales will return to the positive growth path, riding on the excitement created by Auto Expo 2014 and price cuts announced by OEMs following the lowering of excise duty on motor vehicles, in the near future.

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