India’s car sales saw a decline of 15.9 per cent in April, the worst in eight years. Industry executives fear recovery will take time and depend on multiple factors including a good monsoon and the economic policy of the new government, to take office later this month.'
According to the data available with Society of Indian Automobile Manufacturers (Siam), this is the tenth consecutive month since July 2018 when car sales have declined.
Overall, the auto industry sold 2,001,096 units during April. In the same period last year, it had sold 2,380,294 million units.
“In the last 10 years, we have not seen anything like this when all the segments are down. The start of the new financial year has not turned out to be very good,” Siam Deputy Director General Sugato Sen said.
While sales dipped across categories, passenger vehicles (PVs), the most valuable segment of the domestic automobile industry by revenue, reported a decline of 17 per cent in sales. Sales were 247,541 units in April against 298,504 units in the corresponding period last year.
That demand remains subdued in urban areas was evident from a sharp drop in sales of scooters by 26 per cent. Similarly, in a sign of slowdown in rural areas where motorcycles are popular, sales declined by 16 per cent.
According to Vishnu Mathur, director general, Siam, some kind of recovery in sales will come only after the general elections as consumers resume discretionary spends. “Demand in the rural economy is not looking great and it has reflected in the sales of motorcycles, which were down by 11.8 per cent. We cannot expect a sudden recovery in sales anytime soon,” added Mathur.
That the slowdown in sales is going to be a prolonged one was evident from production cuts done by market leaders in all segments. While largest carmaker Maruti Suzuki cut production by 10 per cent in April, major two-wheeler manufacturers like Hero MotoCorp and Honda Motorcycle & Scooter India (HMSI) have decided to further cut production by around 15 per cent during April-June FY19. “For unknown reasons, customers are putting off their purchases during the election, which has hit retail demand. I do not expect demand to pick up in the first quarter,” said R C Bhargava, chairman of Maruti Suzuki.
Niranjan Gupta, chief financial officer at Hero MotoCorp, which is the leader in the two-wheeler segment, said a normal monsoon and a stable government at the Centre would push up sales in the second half of the financial year.
“FY20 is a tale of two halves. While the first half will see flat growth, there could be some recovery in the second half due to pre-buying of BS IV vehicles,” Gupta said.
The slowdown has prompted worries among auto dealers, which do not expect the market to improve soon and have called for leaner inventories. “We will be advocating an inventory of 21 days, almost half the current level of 40-45 days. This is due to an overall decline in volumes, weak consumer sentiment, paucity of working capital, and an uncertain environment,’ said Ashish Kale, president of the Federation of Automobile Dealers Associations, a lobby group of auto dealers.