Car sales down for the 7th month

Prolonged slump sparks fear of job losses in the industry

Passenger car sales in the domestic market declined for a seventh consecutive month, with sluggish economic growth and high inflation and financing costs taking their toll on consumer demand.

In May, car sales fell 12.26 per cent to 1,43,216 units. The prolonged slump has sparked fear of job losses in the automobile industry.

Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers (Siam), said, “This is the longest stretch of consecutive declines in car sales. Commercial vehicle sales have fallen for the 15th consecutive month. During the downturn of 2008-09, the stimulus package announced by the government had helped revive the industry. With the excise duty raised in the Budget this year, sales of utility vehicles, which had recorded strong growth last financial year, have also slowed.”

Last month, utility vehicle sales grew a mere 4.2 per cent to 42,330 units. In 2012-13, utility vehicle sales rose 52 per cent. Overall, passenger (car, vans and utility) vehicle sales dropped 8.9 per cent to 2,01,437 units in May. While sales of commercial vehicles declined 10.6 per cent to 55,458 units, motorcycle sales fell 0.7 per cent to 8,81,288 units.

“The decline in sales is across segments. The drop in motorcycle sales is particularly of concern, as it shows even demand from rural areas has slowed. With manufacturers shutting plants to control inventory, if the slump persists for another three to four months, layoffs are likely in the industry,” Mathur said.

The automobile and the auto component industries directly employ a million workers, including permanent, temporary and contractual ones.

With manufacturers slashing production for 4.08 per cent last month, it is feared temporary and contractual employees working on the shop floor may be laid off if the slowdown continues through the next few months.

Sales of Maruti Suzuki, the country’s largest car maker, fell 13 per cent to 77,821 units in May.

Last month, the company shut five plants across Haryana for a day, to adjust inventory. Siam data shows Ford India and Tata Motors slashed production 53 per cent and 46 per cent, respectively.

Overall, total sales of vehicles, across categories, fell 0.93 per cent to 14,98,909 units in May, compared with 15,12,986 units a year ago.

“A revival would happen only when the economy grows again; a fall in interest rates alone wouldn’t be enough. The overall sentiment is very low. Hopefully, a good monsoon would bring some cheer, at least in the two-wheeler and small car segments. We will review the sales outlook at the end of the first quarter,” Mathur said.