After March pop, Motown’s unsure of road ahead

Domestic car sales rose to a record high in March on pre-Budget purchases, easing production issues and automakers’ rush to cut inventories and meet year-end sales targets.

Analysts and experts, however, said it was a “one-off” case and going forward, the numbers would taper off significantly.

While sales zoomed 208% at Honda Siel Cars, which sold 11,016 units last month as against 3,576 in March 2011, they spiked 179.87% at Nissan from 2,101 units sold in March over 5,880 units a year ago.

Indian automakers, too, were at their best with Mahindra & Mahindra posting a 25.26% growth and Tata Motors 20.45%. Sales growth at Maruti Suzuki, the country’s biggest car maker, was, however, subdued at 3.28%

“Of course the numbers are good but a little pretentious as a lot of issues marred the automotive sector all through the last year, especially the first nine months,” said Revati Kasture, head - industry research, Care Research, a leading ratings agency.

She said the numbers for Maruti were actually commendable as the company had seen erosion of market share from 45% to close to 40% after a strike at its Manesar, Haryana, plant crippled production since July.

“From December-end the production normalised and the order book slowly started turning into real numbers from January and it regained market share. The last quarter was when the company reclaimed its lost market share,” she said.

Similarly, companies including Toyota and Honda that saw spare parts supply reduced due to floods in Thailand, where they have supplier base, are slowly meeting demand, with an accumulated impact coming in March, Kasture said.

Experts said duty hike fears in the Budget, which was announced in mid-March, prompted people to book cars from January itself.

“People wanted to beat the impact of a hike in excise duty on cars, which was increased by 2% in the Budget. This was long expected and hence people rushed with their bookings, the deliveries of which were made in February and March,” said a senior analyst from a domestic brokerage.

A head of research at an international brokerage said March is traditionally a good month as corporates make bookings to avail year-end benefits. Also, car companies push sales to achieve year-end targets.

“Because of factors such as expectations of a hike in excise duty and a build-up of order books for the last few months, sales jumped to a peak,” he said, adding that sales will taper off again from May as macro-economic conditions such as fuel prices and interest rates were still not favourable.

Kasture from Care Res earch said while demand was there throughout the year the supply was moderate and will continue to remain.