Auto sales in the domestic industry continued to sag with seven of the country’s leading manufacturers together posting a meagre growth of 0.6% to sell 192,424 units last month.
But the numbers get even worse if sales of Maruti Suzuki (MSIL) and utility vehicle major Mahindra & Mahindra (M&M) are taken out of the pack- the five others which include Hyundai, Tata Motors, General Motors, Ford and Toyota saw their sales fall by a substantial 14%. The companies are hoping that the festive season would arrest the down slide. Last month the five car companies had seen their sales grow by 12.4% to 79,913 units.
For Maruti Suzuki, September was the first month which saw full production after a lockout in July and August. The company saw its sales grow by 12.7% (88801 units). M&M, in the meantime, rode the demand boom for value-for-money utility vehicles. Its sales went up by 22% (23808 units) in last month.
MSIL’s performance was pushed by demand for multi-utility vehicle Ertiga which sold 7224 units in September. The passenger car segment of the company saw a modest growth of 3.4% to 68,957 units.
Among others who were hit by the slowdown blues, sales dropped by a steep 14% at Hyundai Motor to 30,851 units. The fall in volumes was even sharper at Tata Motors at 18% to 21,652 units. This is the second time in this financial year that M&M has overtaken Tata Motors in monthly sales to grab the third slot in the country’s list of top passenger vehicle makers. While Tata Motors sold 21652 units in September, M&M reported off-take of 23,808 vehicles.
Auto majors like Hyundai Motor India (HMIL), Toyota Kirloskar (TKM), Ford India and General Motors India (GMI) are now banking on the festive season to revive consumer sentiments. “We expect the suppressed demand would improve on account of festive purchases as the demand peaks during this period”, said Rakesh Srivastava, vice-president, national sales, HMIL.
P Balendran, vice president (corporate affairs), GMI, said, “The sales are not on the expected lines as the overall market continues to remain sluggish due to increase in fuel prices, negative market sentiment and various other factors. However, we expect the market to show some improvement closer to the festive season.” Automobile companies record incremental sales of around20% during the festive season.
However, GM is not hopeful of added volumes of more than 5-10%.
The Reserve Bank of India has recently cut cash reserve ratio (CRR) by 0.25% to 4.5%. Post the rate cut others like M&M and Ford India are hopeful that buoyancy would return in the domestic market. “Post reduction in CRR, banks have started cutting lending rates and are also looking at reducing vehicle loan rates. We are hopeful of a good performance in the upcoming festive season”, said Pravin Shah, chief executive, automotive division, M&M.
Financially strapped Kingfisher Airlines was forced to stop flying any aircraft today, as its engineers and pilots decided to stay away from work due to non-payment of their salaries which have been pending from March this year.
With as many as around 80 flights not taking off all across the country, Civil Aviation minister Ajit Singh swung into action acknowledging that the airline for the first time has been confronted with the issue on safety, and even threatening Kingfisher with closure if something is found amiss on the safety front.
Speaking to reporters Singh said: "This is the first time that a safety issue has come up, earlier there were issues about salaries. Till the certified engineers don't certify the airworthiness of the Kingfisher aircraft, DGCA won’t allow them to fly". Singh also added" "If there is a safety issue with Kingfisher we will close it down". The DGCA has also summoned the company's top executives including the CEO for a meeting tomorrow on the growing financial problem.
But Singh again reiterated that an airline cannot be closed down on the issue of non-payment of salary. “By that logic Air India should have been closed down too” he added.
The forced move by Kingfisher, which now operates with only nine aircraft, comes just weeks after the government liberalised foreign direct investment in the sector by permitting foreign carriers to invest up to 49% stake in a domestic carrier. The move was expected to bail out the ailing airlines and its promoter Vijay Mallya said that it was in talks to foreign carriers to rope them in as strategic partners.
"I think the situation has reached a flash point. For months the employees have been getting assurances but these have not been met. It was portrayed that FDI in aviation will come like a knight in shining armor to rescue the airline but even now that does not appear in sight. I think employees are frustrated,'' said a Kingfisher pilot.
Vijay Mallya, airline's chairman, is said to be London. In Mumbai pilots were huddled in a meeting through the day and expected to press their demands with the company's chief financial officer in the afternoon. The pilots are seeking at least three months’ salary but a section amongst them is demanding payment of all the pending dues. However insiders say that the talks did not work out as the company refused to give any assurances.
Director General of Civil Aviation Arun Mishra said he was monitoring the situation closely and decides on course of action in the evening.
However Kingfisher did not come out with a statement today at least while going to the press. Only on Sunday night in a press statement the airline said: “A section of employees of Kingfisher Airlines has not been reporting to work over the last fortnight and over the past 2 days. We are anticipating disruptions and/or delays of flights across our network on October 1, 2012 as it is likely that a section of employees of Kingfisher Airlines may not report to work due to such threats. With a view to mitigating the impact of these anticipated disruptions, we are proactively cancelling several flights across our network for October 1, 2012.”
Twice within the year DGCA has carried out a safety audit of the airline and infact last week Mishra said there were no safety concerns with the airline and that he would look into the issue of flight disruptions when the airline' winter schedule comes up for approval at month end. The DGCA is responsible for issuing airline operator permit and approving flight schedules but so far has not taken action against the airline for not sticking to its schedule.
Faced with its financial mess the airlines has quickly lost market share which is down to 3.2 percent and is now the smallest domestic national airline in the country. That is why Monday's flight cancellations however did not have impact on fares on domestic sectors partly because passenger demand is still low and Kingfisher flies very few flights compared to over thousand flights every day flown across the country
"The airline used to do sales of about Rs 500 crore a month till about six months ago. But now it has come down to less than Rs 100 crore. The airline has not been able to keep its schedule. If schedule reliability is a suspect then passengers will not fly,'' said an airline source.
"Passengers are opting to fly Kingfisher only because its tickets are cheaper. Getting ticket refunds in case of cancellations has been difficult and we are telling passengers to treat the ticket as non-refundable,'' said a travel agent.