Automobile exports rise 3.9% in Apr-Dec amid slide in domestic sales

Exports in the passenger vehicles (PV) segment grew 6% y-o-y, bolstered by higher despatches to Gulf countries, Latin America and South Africa

Overall auto exports from the country rose 3.9 per cent year-on-year (YoY) between April and December of FY20, despite the continuing depressing sentiment in sales. A report by  CARE Ratings shows that automobile sales witnessed the steepest decline of 12.8 per cent YoY in the past five years during April-December. Sales plummeted as price hikes of passenger vehicles and two-wheeler segments due to new safety norms, higher insurance costs, higher ownership costs, liquidity crisis in the NBFC (Non-Banking Financial Companies) sector, reduced turnaround time and increased load carrying capacity for commercial vehicles led to higher inventories and slow movement in segment sales. That apart, lower farm wage growth led by uneven rainfall hurt rural spending. 

 
However, exports showed a contrarian trend in the comparable period. Exports in the passenger vehicles (PV) segment grew six per cent y-o-y, bolstered by higher despatches to Gulf countries, Latin America and South Africa. Two-wheeler and three-wheeler segment clocked 4.6 per cent rise in exports y-o-y. In the period under review, a few auto OEMs (Original Equipment Manufacturers) ramped up exports of existing and new variants to Nepal and Bhutan.
 
“Within  PVs,  exports  of  passenger  cars  witnessed  a  y-o-y  growth  of  about 4.4 per cent  and  MUVs (Multi Utility Vehicles)  segment  grew  by over 11 per cent  and  that of quadricycles with a small base witnessed a y-o-y growth of about 20.8 per cent during the period. On the other hand, exports of vans registered a decline of 17.4 per cent y-o-y during FY20 (April-December). In case of two & three wheelers, while two wheelers segment exports witnessed a growth  of about 6.9 per cent during the period, exports of three wheelers declined by about 8.8 per cent y-o-y”, the report by CARE Ratings noted.

 

The country's total automobile production slumped  13.1 per cent y-o-y during April-December of FY20 as against 11.3 per cent growth  noticed during the same period of last fiscal. In  terms  of  inventory  levels,  PV  inventory  is  at  reasonable  levels  while  that  of commercial  vehicles  has  reduced  but  continues  to  be  above  comfortable  levels heading  into  the  BS  VI  implementation as  per  the latest numbers by the Federation of Auto Dealers Association of India (FADA).
 
In its forecast, CARE Ratings said that the sales  fall in the domestic market is going to exert pressure on overall sales and restrain growth ahead.

 
“We are credit negative on commercial vehicle segment while retaining stable outlook on passenger and two-wheeler segment. Going forward, we expect demand to marginally improve on month-on-month basis in Q4 FY20 with various planned product launches and pre-buying of automobiles  before  the implementation of BS-VI norms on April 1, 2020. Also, most  of the OEMs in PV segment have  announced price hikes from January 2020 to cover the increasing input costs thereby exerting pressure on sales in Q4 FY20”, the report noted.