Industry unsure of revival in passenger vehicle sales despite record rise in Sep

Manufacturers showed rise of 10% vehicles dispatched, while volumes were lower by 4.48% on year ago period

Even as sales of two-wheelers and passenger vehicles in the domestic market rose to its highest level in September in this financial year, industry body Society of Indian Automobile Manufacturers (SIAM) remains skeptic of a recovery in sales in the near future.

 

Last month, automobile manufacturers dispatched 216,031 passenger vehicles, which is an increase of around 10% over an average of 196,952 units sold every month till August this fiscal. The volumes are, however, lower by 4.48% when compared with sales of 226,155 units recorded during the corresponding period last year.

 

“In terms of absolute volumes, sales of passenger vehicles and two-wheelers were highest last month for this fiscal. But it is hard to take a call now whether the market will grow this year. I will be thrilled if the industry is flat or a little bit positive”, said Vikram Kirloskar, president, SIAM.

 

Kirloskar’s concerns gain ground on taking a closer look at the half-yearly sales numbers. Data available with SIAM reveals sales of passenger cars in the first six months (H1) of the current fiscal year have declined by 4.67% to 855,318 units – the steepest fall registered since HI 2002-03, when volumes had dipped by 6.96%. 

 

What has added to the woes of the industry is the continuing weak demand for commercial vehicles, a lead indicator of the country’s economic activity. Vishnu Mathur, director general, SIAM, said, “Sales of commercial vehicles were at their second lowest level in September when considered over a period of 38 months. Even during the Lehman crisis in 2008-09, the passenger vehicle segment had shown marginal growth. But this time the problem is deeper as the slowdown has affected both the PV as well as the CV segments.”

 

Sales of commercial vehicles decreased by a whopping 26.95% to 51,680 units last month as against 70,746 units sold in September 2012. "The stoppage of infrastructure projects and also in mining has affected the commercial vehicles segment badly," Kirloskar informed.

The slow offtake, triggered by high interest rates, fuel prices and inflation has resulted in excess capacity to the tune of 25-30% in the PV segment. In the commercial vehicle industry, production for the April-September period has dropped by 11.58%. While permanent workers have not had to bear the brunt of the downturn yet, Kirloskar said employment of contract workers and trainees across the chain in the industry from component suppliers to manufacturers to dealers has been "significantly” affected.

 

Manufacturers are going ahead with planned projects but questions are being raised about the viability of fresh investments. Kirloskar said, “Whatever (projects) has started will be completed, whether new ones will start is a question. We are trying very hard to explain to the government the need for a stimulus package. This ripple effect of this industry on the economy is huge. The auto industry is a major skills-driver in the manufacturing sector.”

 

On the positive side, the good monsoons have kicked off demand in rural areas. Sales of two-wheelers went up by a strong 18.39% to 1,265,704 units in September as compared to 1,069,069 units sold in the same month last year. According to SIAM, while motorcycle sales last month grew 17.44% to 885,117 units from 753,693 units a year earlier, that of scooters increased by 24.94% to 317,750 units. “Sales grew because of good monsoons, festivals and on back of demand from rural areas. But we have to see if the growth continues”, cautioned Mathur.

 

Overall, sales of vehicles across categories registered growth of 11.64% at 1,580,254 units in September from 1,415,526 units in the same month of 2012.

	Sales September 2012	Sales September 2013	% Change
Passenger Vehicles	226,155	216,031	-4.48
Commercial Vehicles	70,746	51,680	-26.95
Three-wheelers	49,556	46,839	-5.48
Two-wheelers	1,069,069	1,265,704	18.39
Total	1,415,526	1,580,254	11.64

Domestic sales only

Source: Society of Indian Automobile Manufacturers