Festive season remains lacklustre for Maruti Suzuki, sales flat in October

Industry wary of headwinds like high fuel price and insurance cost

It is a lacklustre festive season for carmakers as large number of buyers stay away from purchases in the backdrop of high fuel prices, higher insurance cost, and firm interest rates. 

After three consecutive monthly decline in domestic sales, the passenger vehicle (cars, vans, and utility vehicles) industry is estimated to have grown by a low single-digit of about 2 per cent in October. Country's top carmaker, Maruti Suzuki, which sells every second car in the Indian market, had a flat sales performance in October, identical to the September performance. 

Challenges for the industry started with the Kerala floods, which affected sales in August. Volume did not pick up in September either. The Suzuki-owned firm clocked a marginal growth of 0.6 per cent in sales to dealerships last month. It posted a domestic sales of 135,948 units in October. The flat performance in October has also slowed down the cumulative growth of the company's passenger vehicle segment in domestic market to a single digit for the first time in FY19. Against a 10.50 per cent growth in H1 of FY19, the April-October growth has softened to 9.1 per cent. Maruti Suzuki had projected a volume growth of double digit for FY19 though it could be tough to achieve that.

Maruti Suzuki Chairman R C Bhargava had expressed concerns on the low pick up in festive sales last week. 

"The conditions have changed for the worse in the past few months. This festival season is not showing any buoyancy over last year. We do not expect a 10-15 per cent jump in sales," he said. According to Bhargava, the customers' sentiments and affordability has been affected by the regulation that requires purchase of three-year insurance with a new car. "This has caused an increase of Rs 9,000 in the price of the car.” He also attributed the change in customer sentiments to the regular price increase in petrol and diesel. 

Korean carmaker, Hyundai, helped by the launch of the Santro in October, sold a record 52,001 cars in domestic market last month, up 5 per cent over a year-ago period. The new Santro has garnered bookings of 28,800 units in 22 days. The firm dispatched 8,500 units of the Santro to dealers last month. Indian manufacturers count dispatches to dealers as there is no organised retail data.

The third-largest player, Mahindra & Mahindra, sold 24,066 units in October, growing less than 3 per cent compared to last year. Rajan Wadhera, president (automotive sector) at the firm, said the automotive industry had been witnessing subdued retail sales for passenger vehicles segment for the past few months because of low consumer buying sentiment. “Therefore, one has to remain cautious on how the festive season turns out to be.” 

Home-grown Tata Motors managed its double-digit pace of growth in October as well. It  sold 18,290 units in domestic market, growing 11 per cent over last year. Japanese carmaker Honda reported a flat sales of 14,233 units last month against 14,234 vehicles last year. 

“Despite the festival season, the consumer sentiment has remained subdued last month in comparison to other years,” said Rajesh Goel, senior vice-president and director (sales and marketing) at Honda Cars India. Japan’s Toyota Kirloskar Motor posted 1.6 per cent growth in October sales at 12,606 vehicles. 

N Raja, deputy managing director, said there was a ‘dampening effect on consumer sentiment owing to hike in fuel prices, higher interest rates, and increase in insurance premium’. Ford more than doubled its domestic dispatch to 9,044 units last month. Data based on announcements of seven leading players indicate growth of 4 per cent in industry sales. However, a number of players — Renault, Nissan, Volkswagen, and FCA — have not reported October sales data. The industry growth will be lower once data from other players are known.