Auto Market Slowly Recovering from Demonetisation Pain

The pent-up demand built up over the past two months, when the consumers withheld their purchases due to cash crunch and uncertainty caused by the demonetization of high currency notes, helped auto market recover, albeit slowly, in the first month of the new year. January 2017 saw mixed results, with passenger vehicles and commercial vehicles showing semblance of traction and 2 & 3-wheelers continuing in the rut. Total domestic sales across various vehicle categories added up to 1,620,045 units in January 2017 – down 4.7% vis-à-vis 1,700,141 units in January last year.

Passenger vehicles regain traction

Passenger vehicle sales were back on growth trajectory after two subdued months, post-demonetisation.  Domestic passenger vehicle sales grew by a healthy 14.4% to 265,320 units in January 2017 from the corresponding sales tally of 231,917 units a year ago.

Leading the charge, passenger vehicle market leader, Maruti Suzuki India (MSI) reported domestic sales of 133,768 units in January 2017, a handsome 25.7% increase vis-à-vis 106,383 units in January 2016. The company’s bread-and-butter duo of the Alto and Wagon R sold 37,928 units in domestic market during January 2017 (January 2016: 34,206 units), which translated into 10.9% uptick. Domestic sales of MSI in the compact car segment, comprising Swift, Ritz, Celerio, Ignis, Baleno and Dzire posted 25.2% growth at 55,817 units (January 2016: 44,575 units). Ciaz premium sedan clocked 6,530 units in domestic sales, up 20.2% compared to the January 2016 sales of 5,431 units. The domestic sales of two vans – Omni and Eeco – at 14,179 units, grew by 34.9% y-o-y. Domestic UV sales (Gypsy, Ertiga, S-Cross, Vitara Brezza) zoomed 101.0% y-o-y to 16,313 units in January, thanks to the continuing robust demand for Vitara Brezza that contributed 8,932 units to the sales tally. With the new Gujarat plant having begun production from February 1, starting with the premium Baleno hatchback, the carmaker will be able to increase production of the much-in-demand Vitara Brezza, which continues to have a long waiting period.

Hyundai Motor India Ltd (HMIL, the second largest player in the Indian passenger vehicle market, registered domestic sales of 42,017 units in January 2017, as against 38,106 units in January 2016, clocking a 10.5% rise.

Commenting on the sales performance, Rakesh Srivastava, Senior Vice-President (Sales & Marketing), HMIL, said, “2017 looks promising with the entire industry optimistically looking forward to positive growth. Hyundai has shown growth on account of a good performance by the Grand i10, Elite i20 and Creta and without any new mass model launches. The Union Budget will give a boost to the economy, especially rural India, with its focus on infrastructure creating a robust business environment, thus helping the auto industry.”

Mahindra & Mahindra sold 20,096 passenger vehicles in the Indian market in January 2017, down 9.0% (January 2016: 22,088 units).

Pravin Shah, President and Chief Executive (Automotive), M&M, commented, “The auto industry continues to see mixed reactions and some of the segments including the rural market and the commercial vehicles category continue to face challenging times. Going forward, we expect Union Budget 2017 to positively impact the economy and also the industry, especially in view of the emphasis and the allocations made for rural, agriculture and infrastructure. We are confident that this will spur demand.”

The sustained demand for Tiago hatchback helped Tata Motors post a 13.4% growth in domestic passenger vehicle sales, including cars, UVs and vans, which stood at 14,721 units in January 2017 vis-à-vis  12,987 units a year earlier. With the launch of Hexa in MUV space, Tata Motors’ sales are expected to get further boost in the coming months.

Toyota Kirloskar Motor (TKM) maintained the growth momentum, riding on its new offerings, viz. Innova Crysta and new Fortuner. The company witnessed a decent 21.4% growth in domestic sales, which increased to 10,336 units in January 2017 from 8,511 units a year ago.

According to N Raja, Director and Senior Vice-President (Sales & Marketing), “Even with demonetisation effect, we have still managed to record a 17 percent growth in sales in the past three months. This has been possible due to the overwhelming customer response to the new Fortuner and Innova Crysta.”

Ford India stayed on course, the company’s domestic passenger vehicle sales rising by 13.5% to 7,995 units in January 2017 (January 2016: 7,045 units).

“We continue to grow faster than the industry which is a testament to our strategy focused on product-led innovation, delivering differentiated customer experience and busting the myth of cost of ownership,” said Anurag Mehrotra, Executive Director (Marketing, Sales and Service), Ford India.  

Nissan Motor India registered domestic sales of 4,346 units, comprising both the Nissan and Datsun brands, in January 2017, up 62.9% over 2,668 units in January 2016.

Commenting on the sales results, Arun Malhotra, Managing Director, Nissan Motor India, said, “We have started the new year on a positive note. Despite the challenging market conditions, we have seen a substantial year-on-year growth in January, which signifies strong customer response and trust in the Nissan and Datsun brands.”

Apart from M&M, Honda Cars India Ltd (HCIL) was another car major to record negative growth. The company saw its domestic sales volume decline by 9.0% to 15,592 units in January 2017 from 17,135 units a year ago. The popular City continued to be Honda’s best-seller with 6,355 units, followed by Amaze (3,911 units) and Jazz (3,124 units). BR-V SUV contributed 1,458 units to the company’s domestic sales tally; Brio, 627 units; and Mobilio, 63 units. With the launch of new Honda City, HCIL’s sales numbers are expected to get fillip.

Yoichiro Ueno, President and CEO, Honda Cars India, said, “Our sales results recovered in January as consumer sentiment and the currency situation have started improving gradually. We hope the situation normalises and the market recovers quickly.”

Two-Wheeler Sales Continue to Struggle

Although there are straws in the wind indicating that two-wheeler sales reeling under the impact of demonetization are on comeback trail, the total domestic sales in January 2017 remained negative. The total 2-wheeler sales in domestic market across industry at 1,262,141 units, were down 7.4% y-o-y in January 2017, building up inventories at the dealerships.

The two-wheeler market leader, Hero MotoCorp selling 471,720 units in the Indian market during January 2017 witnessed negative growth of 13.7% y-o-y.

India’s second largest two-wheeler maker, Honda Motorcycle & Scooter India (HMSI) reported sales of 367,972 units in January 2017, posting a measly 1.7% uptick vis-à-vis  361,739 units in January 2016.

TVS Motor Company’s domestic two-wheeler sales at 172,101 units in January 2017 were more or less flat, compared to the domestic sales figure of 172,162 two-wheelers a year ago.

Bajaj Auto posted 14.9% y-o-y decline in domestic sales of two-wheelers, which aggregated 119,803 units in January 2017.

Royal Enfield continued its dream run, clocking a 23.3% growth in domestic sales to 58,133 units in January 2017, vis-à-vis 47,140 units in January 2016. In the process, Royal Enfield pipped India Yamaha Motor to become the 5th largest two-wheeler player in terms of sales volume.

India Yamaha Motor recorded domestic sales of 34,117 units, witnessing a steep 41.9% decline y-o-y.

Commercial Vehicles still weighed down by demonetization impact

Commercial vehicles came up with a much improved sales performance in January 2017 after December 2016’s sluggish sales. However, overall sales numbers were still in negative terrain. Total CV sales in domestic market stood at 61,239 units in January 2017, reflecting a 0.7% dip y-o-y.

Ashok Leyland rebounded with a 9.2% growth in its domestic sales that added up to 13,715 units in January 2017 (January 2016: 12,564 units).

Volvo Eicher Commercial Vehicles (VECV) also turned in a decent performance to notch up an 11.2% uptick in domestic sales at 3,796 units in January 2017, compared to 3,415 units a year ago.

The CV market leader, Tata Motors was in negative terrain. The company’s domestic CV sales at 26,707 units in January 2017 were down 6.0% y-o-y.

Likewise, Mahindra & Mahindra (M&M) witnessed a 3.4% drop in domestic CV sales that clocked 13,890 units in January 2017 vis-à-vis 14,385 units in January last year.

While the auto market is slowly recovering, the commercial vehicle and two-wheeler segments are still weighed down by the demonetization blues. Given that BS IV emission standards will be mandatory for all CVs from April 1, 2017, a feverish pre-buying of CVs is expected to happen till March 2017. With rural & agriculture sector getting boost from the Union Budget 2017, rural market is also expected to pick up gradually. The outlook for the auto market in India is promising.




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