Robust growth in two- and three-wheelers masked the glaring glitches in automobile sales last month and pulled it up to a respectable 8.86 per cent. The glitches were most pronounced in commercial vehicles, whose sales plummeted by nearly 15 per cent. Sales of passenger vehicles, mainly cars and utility vehicles, dipped by just under 1 per cent, according to figures released today by the Society of Indian Automobile Manufacturers, or SIAM).
From February to April this year, vehicle sales grew in double digits. In April, passenger vehicles had grown by 5 per cent. The May decline, according to SIAM Director General Dilip Chenoy, is primarily due to the dip in sales of utility vehicles, which fell 29 per cent, while sales of small cars grew by an impressive 11 per cent. The small car segment contributes around 70 per cent to the total number of cars sold.
Analysts say the other reasons for the drop in passenger vehicle sales in May is linked to the diminishing appeal of excise duty cuts announced in the stimulus package in January this year. Excise duty cuts helped car manufacturers to lower prices of cars. Industry executives say in addition to PSU banks lowering interest rates for car loans, more needs to be done. Like rationalising the excise duty on utility vehicles, which currently stand around 25 per cent. For small cars, it’s 8 per cent.
Motorcycle sales for May grew by 12.34 per cent, a continuation of the double-digit growth seen since February. The sales for scooters grew by 11.5 per cent on the back of strong demand in urban markets. According to industry executives, the average waiting period for automatic scooters is around 20 days.
Sales of three-wheelers grew by 5.27 per cent in May. This growth comes primarily from the passenger vehicle segment, which grew by 15.3 per cent.
Commercial vehicle (CV) sales for May, comprising both medium and heavy vehicles, dipped by 37.5 per cent. While sales of light commercial vehicles grew by 11.8 per cent. Industry analysts say the stimulus package announced in January for the CV industry is insufficient to kickstart the industry. “Apart from the economic recovery we expect in the second half of 2009, what the industry needs is investments in the country’s infrastructure, which directly creates demand for commercial vehicles,” says R Seshasayee, MD of Ashok Leyland.
The 15,000 bus order under the JNNURM project, according to industry executives, is yet to be finalised “Orders for around 7,000 buses have been placed so far and the remaining order is yet to be realised,” says one. Executives say long-term demand for buses will come only when the new government puts in place a comprehensive public transportation policy.
SIAM does not expect June sales to be robust. A Mumbai analyst says demand, especially for two wheelers, could go into double digits once the RBI’s guidelines on vehicle repossession norms are announced. That will spur lending from NBFCs. The other factor critical to vehicle sales are good monsoons, which will boost rural spending.
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