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Some festive boost for automobile sector, but the cheer is missing

Car sales decline due to increase in retail sales in festive season, Maruti sales rebound to growth

Arindam Majumder  |  New Delhi 

Photo: Shutterstock

Festive sentiment gave a boost to four- and two-wheeler sales in October, with the country’s largest carmaker (MSIL) showing growth in sales after eight months.

However, industry executives cautioned that the slight revival in demand witnessed primarily during the 15 days of Navratri and Dhanteras — driven by aggressive discounting — is not a barometer to check demand, and things could be back to worse as most of the issues affecting demand for cars and two-wheelers still persist.

That the economic gloom persists was highlighted by sales figures of commercial vehicle makers, which dropped more than 50 per cent despite lucrative discounts.

Ashok Leyland said the company plans to observe 0-12 days of no production during November. Total sales for the company declined by 35 per cent. Rating agency CRISIL noted that transporters shied away from purchases, given the higher down-payment now, amid lower loan-to-value being offered by banks.

“Festive sales have been really good, with growth across all categories. However, I am cautiously optimistic going into November, as banks are still very cautious to lend and cost of ownership remains high,” said Shashank Srivastava, Executive Director of MSIL. The firm on Friday reported a 2.5 per cent increase in total sales in the domestic market during October. According to dealers, demand picked up mainly in the second half of Navratri, or the nine days leading to Dussehra, as it is considered an auspicious phase for purchases.

“This cannot be, in any way, called a demand revival, but a small push owing to festive sales. The impact on monthly numbers is starker, as unlike last year, the entire festive season was captured in October this year,” said Nikunj Sanghi, managing director of JS Fourwheel Motors, a dealer for Hero Motocorp.

Some festive boost for automobile sector, but the cheer is missing

Sanghi said a drop in the post-festive season demand had already started showing. However, the upcoming wedding season — which usually sees a spike in two-wheeler sales — may insulate the sector from a sharp decline in November sales.

“A lot of confusion regarding the GST rate cut and the future of already registered BSIV vehicles were clarified by the Finance Minister, which have resulted in buyers converting their enquiries into sales. However, I remain cautiously optimistic,” said Vikas Jain, national sales head at Hyundai.

What cheered the sector most was that better-than-expected retail demand helped firms ease their inventory levels at dealerships, which had surged to a record high of 45 days.

The growth was driven by first-time buyers, as is the case usually. Specific markets such as Uttar Pradesh and Chhattisgarh — where retail growth has been above 15 per cent — have also bolstered our overall retail growth during this festive season.

Our inventory levels are now down to 30 days and future despatches are being planned, in keeping with market demand. Despatch numbers for October reflect our conscious effort at further correcting dealer inventories,” said Sanjay Bahn, chief (sales, aftersales and parts), Hero MotoCorp.

Sales in October were also heavily bolstered by aggressive discounting from major players such as Maruti Suzuki and Hyundai.

“There were never-before-heard discounts even on popular models such as Brezza, Creta. Therefore, pushed by festive sentiment that translated to sales,” said Sanghi.

Srivastava of Maruti acknowledged that discounting had indeed played a part in improved sales. “The discounts are still continuing, but we will take a call regarding this factoring in the market conditions. There will be decline in terms of offers hereon,” he added.

First Published: Fri, November 01 2019. 21:13 IST