Auto makers look to FY16 for revival

Sales growth of medium and heavy commercial vehicle was strongest after scooters at 16% closing at 2.32 lakh units last year

On the back of a dozen new product launches the passenger vehicle industry just about managed to post a growth last financial year selling 2.6 million units. However they were still lower than 2012-13 when the segment hit a peak at 2.68 million units.

At a 4% growth last year the first time buyer disappeared from the market and existing car owners postponed their new vehicle buys even as the passenger vehicle industry got saddled with excess inventory while discounts hit all-time highs.

Sales growth of medium and heavy commercial vehicle was the strongest after scooters at 16% closing at 2.32 lakh units last year. However, despite the growth they were only on par with 2009-10 and substantially lower than 2011-2012 when the segment peaked at 3.48 lakh units.

Besides the slowdown in infrastructure activity hampering CV growth one of the primary reasons behind the slow growth rate is because of a near collapse in demand from the rural segment. Rural areas contribute up to 30% of passenger vehicles and half of two-wheeler sales.

The first quarter of this year has brought little respite. While new car launches have attracted buyers to showrooms pushing April-May sales by 10%, early indicators of a slowdown in the urban market have become evident.

Scooters, which are primarily sold in the urban pockets, marked a growth of just 4% in April-May as against 25% recorded last year. Overall domestic two-wheelers reported a fall of nearly 1% as against 8% growth last year as rural demand took a knock.



Industry watchers say that the first two quarters of this year is expected to remain subdued as buying power will remain low. However auto companies believe that the first two quarters should not be held as an indicator for the year.

The Indian PV industry's domestic volumes is likely to grow by 5-7% in FY16 supported by return of first time buyers, replacement demand owing to large base of FY10/FY11 and aggressive new model launches planned in compact UV segment.

Indian luxury car market will outpace overall PV growth and is likely to grow at 15%-20% in current fiscal, says ICRA in its latest research update on Passenger Vehicle Industry.

More than a dozen new product launches and several upgrades and variants in the car and utility vehicle space are set to hit the market this year. The luxury car segment will see more than 20 launches until December.

Market leader Maruti Suzuki, which has so far seen a 20% growth in volumes in the first two months, appears most optimistic of a turnaround. R C Bhargava, chairman, Maruti Suzuki said, "Maruti expects double digit growth this year. There is no serious worry about sales".

In addition to Maruti, Hyundai, Tata Motors, Mahindra and Mahindra, Honda, Renault and Volkswagen have lined up all-new launches for the year while others have promised product upgrades.

The pace of new launches will be the same for two-wheelers and commercial vehicles too with a number of introductions planned for the year. Honda, Hero, TVS Motors and Bajaj Auto have either already launched new products or are in the process of launching them.

Much of that demand boost will be dependent on the monsoon say industry experts. Pawan Goenka, executive director, Mahindra & Mahindra, said, "The current years' monsoon will be the most important this year than earlier years. We expect the second half of the year to bring a change in rural demand."