Auto Market Feels the Heat of Demonetisation

The ongoing cash crunch, following the government’s demonetisaion of Rs 500 and Rs 1,000 currency notes, continues to play spoilsport for the auto market. The total domestic vehicle sales across all segments, reeling under the impact of demonetization, plunged 18.7% to 1,221,929 units in December 2016 vis-à-vis 1,502,314 units a year ago.

Passenger vehicle sales ride on the year-end freebies and discounts, yet slip into negative terrain

Despite the year-end freebies and handsome discounts, passenger vehicles clocked 227,824 units in domestic sales, falling by 1.4% in December 2016, as against 230,959 units in December 2015.

Maruti Suzuki India (MSIL), the bellwether of the Indian passenger vehicle industry, recorded 4.4% decline in domestic sales that numbered 106388 units in December 2016 (December 2015: 111,333). All sub-segments, barring mid-size (Ciaz) and UVs (Gypsy, Ertiga, S-Cross and Vitara Brezza) posted negative growth. While Ciaz posted a growth of 30.6% in domestic sales at 3,711 units, the domestic sales of UV sub-segment at 16,072 units were up by whopping 75.3% y-o-y, thanks to 8,971 units contributed by hot-selling Brezza. The company’s bread-and-butter duo of Alto and Wagon R sold 31,527 units in domestic market during December 2016 (December 2015: 37,234 units), down a sizeable 15.3%. Domestic sales of the compact car quintet of Swift, Ritz, Celerio, Baleno and Dzire were also down 8.6% y-o-y to 43,295 units in December.

Hyundai Motor India Ltd (HMIL) witnessed a 4.3% dip in domestic sales, which stood at 40,057 units in December 2016 compared to the 41,861 units in December 2015. However, the company crossed the 5-lakh-unit sales-mark in a year in India, clocking 5,00,537 units in CY 2016.

Y K Koo, MD & CEO, HMIL, commented, “2016 has been an Year of Excellence for Hyundai in India achieving various milestones - Celebrating 20 years in India, the roll-out of 7 millionth car in Nov’16, crossing the 5 lakh domestic sales in CY2016 and the fastest 50,000 unit sales in the month of October.”

Mahindra & Mahindra (M&M), largely dependent on rural market that has taken a severe hit post-demonetisation, reported domestic sales of 16,698 passenger vehicles (comprising UVs, cars and vans) in December 2016, which reflected an 8.2% drop vis-à-vis 18,197 units in December 2015.

Pravin Shah, President & Chief Executive (Automotive), M&M, said, “The auto industry continues to go through challenging times, grappling with the short-term effects of demonetisation. However, we believe there will be a gradual pick-up in demand starting next few months.”

Another home-grown player, namely, Tata Motors, however, bucked the demonetization blues. The company posted a healthy growth of 24.7% y-o-y in domestic passenger vehicle sales at 12,012 units in December 2016 on the back of continuing robust demand for its latest hatchback – Tiago that contributed 4,013 units to the PV sales tally.

Toyota Kirloskar Motor (TKM) also notched up an impressive 22.0% uptick in domestic  sales that aggregated 12,747 units in December 2016 (December 2015: 10,446 units). The newly launched Toyota Fortuner and the new Innova Crysta were the main growth drivers for the Japanese automaker.

Powered by the Kwid hatchback, Renault India’s domestic sales registered a 9.2% increase in Decemeber 2016 with sales tally of 11,244 units (December 2015: 10,292 units). For calendar year 2016, the carmaker sold a total of 132,235 units, up 146.0% (CY2015: 53,847 units).

Sumit Sawhney, country CEO & MD, Renault India Operations, said: “We are on track with a 4.5 percent market share at the end of 2016, achieving a robust three-digit growth over 2015. We plan to launch at least one new product every year, over the next five years, beginning with some exciting product innovations starting this year. We will continue to build our network this year as well, with strategic measures to make our cars more accessible to customers across the country.”

Honda Cars India Ltd (HCIL) stayed in reverse gear, posting 18.6% decline in domestic sales to 10,071 units in December 2016 (December 2015: 12,379 units). The Amaze sedan was the best-seller with 3,322 units, followed by City with 2,898 units. While domestic sales numbers for Jazz and BR-V were identical at 1,601 units, those for Brio, Mobilio and CR-V read 443 units, 151 units and 55 units, respectively.

Yoichiro Ueno, President and CEO, HCIL said, “After a severe impact of demonetisation in November 2016, December 2016 sales continued to be challenging. We expect the new year to gradually bring back normalcy in the market.”

Nissan Motor India  reported domestic sales of 3,711 units in December 2016, a 21.2% y-o-y increase. The Nissan and Datsun sales combined registered 50% YoY growth during 2016.

“We have achieved consistently strong sales in the first three-quarters of this fiscal year. The growth we’ve achieved from April through December positions us as the second-fastest growing company in the passenger vehicle segment in India, a significant feat for a comparatively young company,” Arun Malhotra, MD, Nissan Motor India, said.

The Nissan Motor India Group, which manages the sales and service support for both the Nissan and Datsun brands, plans to introduce up to eight new cars from the two brands in India by 2021. These new products include the recently-launched Nissan GT-R and the launch of X-Trail Hybrid in 2017.

Meanwhile, Ford India’s domestic sales slipped 6.0% to 5,566 units in December 2016, from 5,924 units a year ago. However, the Chennai-based carmaker reported strong exports of 17,904 units in December 2016, clocking a handsome 262.4% growth (December 2015: 4,941 units).

In CY 2016, Ford India clocked 151,638 units in exports.

The surge in export numbers has come about, thanks to the growing demand from overseas markets for the made-in-Chennai new Figo, which is sold as the Ka+ in the UK and Europe.

Two-wheeler sales bogged down by demonetization

The two-wheeler market, particularly the rural two-wheeler market that is majorly dependent on cash transactions is grappling with an acute slowdown due to cash crunch. Two-wheeler sales in domestic market plummeted by 22.0% y-o-y to 910,235 units in December 2016.

The two-wheeler market leader, Hero MotoCorp posted domestic sales of 330,202 units in December 2016, which translated into a steep 33.9% fall from 499,665 units in December 2015.

Honda Motorcycle & Scooter India (HMSI) sold 205,158 units in the Indian market in December 2016 as against 290,540 units sold in December 2015, thus, recording a decline of 29.4%.

Commenting on the sales, YS Guleria, Sr VP – Sales and Mktg, HMSI, said: “Demonetisation continued to negatively impact customer sentiments for the second consecutive month and domestic two-wheeler industry closed at an 80-month low of 909,000 units in the traditionally lean month.”

Bajaj Auto’s domestic sales in December 2016 at 106,665 units were lower by 11.4% y-o-y.

TVS Motor Company that had been performing steadily slipped into negative terrain with 8.9% decrease in its domestic two-wheeler sales that stood at 153,413 units in December 2016 (December 2015: 168,160 units).

Bucking the trend, India Yamaha Motor posted a healthy 28.2% growth in domestic sales to 49,775 units in December 2016 from 38,833 units in December 2015.

Roy Kurian, VP - Sales & Mktg, Yamaha Motor India Sales, said, “2016 has been a landmark year for us. This year, Yamaha crossed the 100,000 sales figure consecutively in two months (September and October 2016). Yamaha will enhance its product portfolio and intensify its network expansion plan with a target of achieving 1 million sales in 2017.”

Driving in top gear, Royal Enfield clocked domestic sales of 56,316 units in December 2016, which marked an impressive 40.7% increase over the corresponding sales figure of 40,037 units in December 2015.

Commercial Vehicle sales remain subdued

The demonetization pain has been all-pervasive, the commercial vehicles being no exception. Total domestic sales of commercial vehicles at 53,966 units were down 5.0% y-o-y. While the LCVs scraped through with a measly 1.2% growth in domestic sales, the MCV sales in the Indian market declined by 12.4% y-o-y in December 2016. All CV majors, barring M&M, were in negative terrain.

Tata Motors’ domestic sales of CVs at 23,813 units in December 2016 declined by 7.6% y-o-y. However, the construction sub-segment grew strongly by 22% y-o-y due to pick-up in the road construction and the coal & iron ore mining activities. Tata Bus sales grew by 59% over last year.

Ashok Leyland posted a negative growth of 14.2% in domestic sales that stood at 9,700 units in December 2016 (December 2015: 11,299 units).

VE Commercial Vehicles’ domestic sales at 3,246 units were in negative territory, declining by 21% (December 2015: 4,109).

Mahindra & Mahindra was the exception, with its CV sales in domestic market growing by 13.5% to 14,154 units in December 2016 (December 2015: 12,465 units).

The auto market is currently witnessing muted conditions due to cash crunch and downbeat sentiment. It is hoped that the forthcoming Union Budget to be presented on February 1, 2017, will be a consumer- and business-friendly one, giving boost to the sentiment and economic activity, including vehicle sales.

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