Auto cos still cautious despite sales surge

Arvind Saxena, senior V-P (sales and marketing) at Hyundai Motor, is happy with “the sense of optimism in the market”, but is not joining the motown party over surging sales — not yet anyway.

“When you compare last year’s July or June’s sales with that of this year, it had a much lower base. Enquiry levels are still high, but conversion rate is still on the lower side due to the customer’s inability to make a decision,” Saxena says.

That sums up the mood in auto companies. While last month’s impressive performance has pushed the monthly sales tally to well beyond 110,000 units and almost all manufacturers posted double-digit growth rates, the mood remains cautious. That’s because many feel the recent uptrend was more on account of last year’s very low base and less because of a full revival in demand.

That’s the reason why all leading manufacturers, such as Maruti Suzuki, Hyundai Motor India and Tata Motors, are hesitant in predicting even a low double-digit increase in sales next month.

Maruti Suzuki, India’s biggest car maker, had predicted a 5 per cent growth at the beginning of the year. Despite the surging sales in July, the company is now saying it would rather do a month-on-month assessment instead of sticking to its earlier target. Experts said the change in stance has been prompted by the realisation that, while new models such as Ritz and A-Star are showing good results, the old models are still to see much pull. The company saw domestic sales jump 27 per cent last month to 67,528 units.

Tata Motors, India’s third-largest car maker, was able to post impressive sales, but that’s more because of the Nano. Excluding the ultra low-cost car, the company has posted an increase of just under 1 per cent. Total passenger cars sold by Tata Motors in July, excluding Nano, stood at 12,062 units, compared with 12,012 units sold in the same month a year ago.

Meanwhile, Mahindra & Mahindra, India’s biggest utility vehicle player, has stated that the increase seen by the company last month was directly related to the spurt in demand for its models such as the Xylo and Bolero.

Rajesh Jejurikar, chief of operations, Mahindra & Mahindra, said: “Xylo has accounted for most of the sales in the April-July period, although Scorpio and Bolero have also done well. It will not be possible to maintain such a high growth, but we are hopeful of a double-digit growth for the year”.

The company reported a growth of 56 per cent in utility vehicle sales at 16,688 units in July, against 106,672 units reported in the same month a year ago.
 

SLIPPERY ROAD AHEAD?
Companies	July'08	July'09	Growth (%)	Q1'08*	Q1'09	Growth (%)
Maruti	52,911	67,528	27.6	60,031	65,802	9.61
Hyundai	15,066	23,193	53.94	22,630	22,922	1.29
Tata Motors	14,652	17,191	17.32	19,287	18,685	-3.12
Mahindra	10,672	16,688	56.37	9,038	11,677	29.19
Honda	4,337	4,857	11.98	4,025	4,256	5.73
Numbers are for domestic market only.  *Figures are monthly average for the first quarter Source :- Companies and SIAM

Whatever the concern, the fact is auto sales have zoomed. For some, this is enough to up production. Hyundai reported a growth of 54 per cent in domestic sales last month, selling 23,193 units. The approaching festive season has prompted the company to operate its plants in three shifts instead of two shifts earlier, thereby jacking up its production by 20 per cent.

However, auto experts say that improving economic conditions have built a growth momentum, but a sustained double-digit growth is still way off.

Kapil Arora, partner (automotive practice), Ernst & Young, said: “The recent spurt in vehicle sales is encouraging and can be attributed to a combination of factors, including improved customer confidence, easing of the liquidity crunch for vehicle financing by banks and moderate interest rates. The industry expects domestic passenger vehicle sales to grow around 5 per cent in volume terms in FY10.”