Car sales rise 3% after eight months on stable central govt

However, growth will stay only if excise duty cut of interim Budget continues, say experts

A stable government at the Centre seems to have lifted consumer sentiment, with sales of passenger vehicles in the domestic market increasing three per cent to 207,953 units in May, the first increase in eight months. However, while buyers seem to be returning to showrooms, a definite turnaround in vehicle sales might be some time away.

The previous time passenger car sales had risen was in August 2013, increasing 4.47 per cent to 190,053 units.

Vishnu Mathur, director-general, Society of Indian Automobile Manufacturers (Siam), said, “The sentiment seems to have improved in the market. Enquiries are now being converted into sales. The formation of a stable government at the Centre, coupled with a fall in the cost of cars due to a cut in excise duty, has brought back positive sentiment.” However, he clarified it was too early to assume this was a turnaround in the market. (AUTO SALE WATCH)

Much depends on whether the excise duty cut announced in interim Budget 2014-15 finds favour with those in the new regime. “We hope the government will retain the current excise rate beyond June 30. Also, we are looking forward to the rollout of the GST (Goods and Services Tax and environmental clearances for industrial projects to kick-start the economy,” Mathur said.

In the interim Budget, then finance minister P Chidambaram had cut excise duty on small cars, scooters, motorcycles and commercial vehicles from 12 per cent to eight per cent; on sports utility vehicles from 30 per cent to 24 per cent; on mid-sized cars from 24 per cent to 20 per cent and on large cars from 27 per cent to 24 per cent.

Mathur said predictions of a below-normal monsoon this year might put a spanner on auto sales. “The government has already spoken of contingency plans and if these are effective, we hope there won’t be much impact. Otherwise, in case of a poor monsoon, the demand for two-wheelers and small cars in rural markets could be affected.”

In May, vehicle manufacturers sold 148,577 passenger cars in the domestic market, an increase of 3.08 per cent compared with 144,132 units in the year-ago period. Owing to new models, carmakers such as Maruti Suzuki (Celerio), Hyundai (XCent, Grand and Santa Fe), Honda Cars (City), Ford (EcoSport) posted good growth in volumes.

While Maruti Suzuki’s sales rose 16.37 per cent to 90,560 units, sales of rival Hyundai Motor increased 12.78 per cent to 36,205 units. By contrast, domestic automobile majors Tata Motors and Mahindra & Mahindra (M&M), with no new vehicles in their portfolios, continued to see sluggish demand. While sales of Tata Motors fell 29.54 per cent to 12,103 units, those of M&M decreased 21.36 per cent to 19,470 units.

Mathur said the slight traction in passenger vehicles wasn’t seen in the commercial vehicle category, which recorded its 19th consecutive monthly sales decline in May — total sales of commercial vehicles fell 15.28 per cent to 46,986 units from 55,458 units in the year-ago period. Siam said in May, sales in the two-wheeler segment rose 16.3 per cent to 1,402,830 units from 1,206,173 units in the corresponding month last year. While motorcycle sales rose 11.71 per cent to 984,469 units, sales of scooters increased 34.48 per cent to 357,564 units.

Overall, sales of vehicles across categories registered growth of 13.22 per cent at 1,698,138 units, against 1,499,893 units in the year-ago period.