Domestic car industry to report decline in July sales on high base effect

A month after an abnormal growth of 37 per cent (owing to a low base effect of June 2017), the domestic automobile industry is expected to report a decline in July on a high-base effect of corresponding month last year. Country’s largest carmaker, Maruti Suzuki, has reported a drop of 0.6 per cent in July passenger vehicle sales.

If Maruti Suzuki’s numbers are any indication, it is almost certain that the industry will report a decline in July passenger vehicle (cars, utility vehicles and vans) sales to dealerships. The industry had reported a growth of about 15 per cent in July 2017. Such a double-digit growth is unusual for July, a month of low demand. 

However, last year, July was a month of strong growth since companies had regulated dispatches in June to ensure minimum inventory at dealer level owing to transition to GST, which was implemented from July 2017. The industry had declined about 11 per cent in June 2017.

Maruti Suzuki, which sells a car every second in the country, dispatched 152,427 units of passenger vehicles to dealerships last month against 153,298 units in July last year. Except for the compact segment, which has vehicles like Swift, Dzire and Baleno, all other segments posted a decline. The compact segment, biggest for the company, grew 18 per cent to 74,373 units. Reacting to the announcement, the carmaker’s stock slipped almost 2 per cent on the BSE and was trading at Rs 9,338 at 12.55 pm after opening in the green.

R S Kalsi, Senior Executive Director, marketing and sales, Maruti Suzuki, said July volumes must be seen together with June sales. “If we see the company’s June-July volume it gives us a growth of 17 per cent. We have sold more cars in July than June but there is no growth due to high-base effect,” he added. Maruti Suzuki sold 134,036 units in June but owing to a low base, the growth was 44 per cent. Though July volume is much higher at 152,427 units there is no growth owing to the high base of last year.

Kalsi said it will be a flat month or a month of decline for the industry as well even though absolute numbers are going to be higher month-on-month. M&M, the third biggest player in the domestic passenger vehicle market, has reported a 6 per cent drop in July sales to 19,781 units. “The auto industry has been subject to certain uncertainties with the truckers strike and sluggishness on the retail front which has impacted the passenger vehicle segment,” said Rajan Wadhera, president (automotive sector) at M&M.

Ford has reported a decline of 7 per cent in July domestic sales at 7,816 units. “The transport strike impacted both the production as well as shipment of Ford vehicles in July,” said Anurag Mehrotra, president and managing director at Ford India.