Car sales dip for first time in 3 yrs

The car industry recorded a dip in sales for the first time in more than two and a half years as sales in the domestic market slipped 1.71 per cent in July as interest rates, inflationary pressures and a hike in fuel prices dented demand. The segment last recorded a similar decline in November 2005, when sales dipped by 2.36 per cent.

In the passenger car segment, 87,724 units were sold last month compared with 89,250 units in the corresponding month last year, according to figures released today by the Society of Indian Automobile Manufacturers (Siam).

Passenger car sales in the first four months of this financial year rose by about 11 per cent over the same period last year. The industry has sold about 500,000 units this year.
 

SLOW PACE
Category	July '07

July '08

Growth % 

Cars 89,25087,724-1.71 Utility vehicles18,44517,379-5.77 Passenger vehicle  Total1,15,4811,13,817-1.44 Commercial vehicles33,70934,3591.92 Three wheelers 30,89031,3571.51 Scooters87,83099,45813.23 Motorcycles3,75,0044,57,17821.91 Two wheeler total 501,691599,36919.46 Grand total6,81,7717,78,90714.24

There are a few key concerns for passenger car sales in the coming quarters – finance, future price revisions, excise duty on larger cars, and cost of fuel. “The percentage of financing which stood at 80 per cent earlier has now come down to 70 per cent. Stringent norms for sanctioning loans have lead to as much as two-months waiting period for certain car loans,” says Dilip Chennoy, Director General of Siam.

The industry hopes that the festival season beginning September could see the launch of newer models such as Maruti’s A Star and Tata Motor’s Nano. It could spur consumer interest in buying new cars. “By year-end, we’re hopeful of a double-digit growth for the car industry,” says Chennoy.

However, auto analysts are not that upbeat. Says S Ramnath, analyst, SSKI Securities, “We do not expect the growth to be higher than 8-10 per cent in the car segment for the year. High interest rates and lower buying sentiments will continue to impact demand for vehicles.

The situation might improve during October with the festive season setting in, but the outlook for the next two months looks bleak. New offerings will revive sales.”

“Lending norms are expected to become stricter in some of the riskier markets such as Rajasthan, Haryana, UP and MP in the event of increasing cases of defaults on repayments,” said an official from one of the leading banks.

In July, the country’s biggest car maker Maruti Suzuki reported a flat growth in sales as it sold just 72 more cars in the domestic market when compared to the same month of the previous year. The company has a 46 per cent market share in India.

Korean car manufacturer Hyundai Motor India too posted a dismal performance during the same month as its domestic sales totalled 15,066 units, a growth of just 0.4 per cent. The company expects a further slowdown in demand in coming months.

Tata Motors, which reported a near 14 per cent decline in sales in July, is banking on its new launches in the compact and ultra small car segments to improve sales. Similarly, Mahindra & Mahindra (alongwith Mahindra Renault) recorded a 16 per cent decline in sales in the same period.

Sales of commercial vehicles were near flat at 2 per cent in July. The industry saw sales of 34,359 units as against 33,709 units recorded in the same period a year ago.

“During the period of lower interest rate regime, truck buyers financed new purchases in excess of what was required. Now with the GDP growh moderating, there is unutilised capacity. This could impact CV sales in the coming quarters,” says an executive from Sriram Finance.

Meanwhile, two-wheeler sales improved by almost 22 per cent in July on the back of strong performance by market leader Hero Honda, which contributed 47 per cent of the total sales. The company saw a whopping 40 per cent growth in July at 2.81 lakh primarily due to its push in the rural markets.

“Now the two- wheeler industry is trying innovative methods for providing finance to consumers, and engaging customer’s interest with constant model upgradation. Somehow motorcycle manufacturers have got it faster than passenger car makers,” said Chennoy.

Bajaj Auto, however, sold 1.69 lakh with a growth of just 4 per cent as compared to the previous year.

The two-wheeler industry comprising scooters, motorcycles, mopeds and electric bikes saw sales of 5.99 lakh units in July as compared to 5.01 lakh units posted in the same month a year ago.

Also read: Auto sales in July skid on slowdown