Car sales pick up, but no celebrations yet

Car sales grew in July for the second consecutive month on the back of improvement in buyer sentiments.

As per data provided by eight top car makers, wholesale passenger vehicle dispatches grew 12.2% in July over the same month last year.

This is the second consecutive double-digit growth in car volumes in the current fiscal, after the industry witnessed a slowdown for almost two years.

Experts, however, said it is too early to call it a recovery as the growth in volumes in more sentiment-driven after the new government at the Centre.

As per the wholesale numbers announced by car manufacturers on Friday, sales of Maruti Suzuki, Hyundai Motor India and Honda Cars India grew during the month, while sales of most other car companies, including that of Mahindra & Mahindra (M&M), Tata Motors and General Motors, fell.

Domestic sales of Maruti Suzuki – the biggest car maker – grew by 19.9% in July as it sold 90,093 units.

"Enquiries have gone up in the past few month. However, this is more of a sentiment-driven demand. Increase in investments, job creation, fectival season -- all this will add to the momentum. If all this happens we will see better next year," said a Maruti Suzuki executive, talking to analysts on Thursday.

Hyundai, the second-largest car firm sold 29,260 units in July as compared with 25,965 units in July last year, recording a growth of 12.7%.

Rakesh Srivastava, senior VP- sales and marketing for Hyundai Motor India, said in a statement, "The demand pull created by the successful product launches and strong channel spread has brought down the discounts and the green shoots of growth are visible with the stabilisation of macroeconomic factors and near-to-average monsoon."

Clocking a total wholesale dispatch of 15,709 units in July, Honda Cars India, became the third-largest car company, in terms of volumes during the month, racing ahead of M&M. The company sold 15,709 units in July, reporting a growth of 40% over last year, on the back of new launches like Mobilio (its first multi purpose vehicle) and City.

The gap between the two manufacturers, however, continues to remain narrow as M&M – the biggest utility vehicle maker, sold 14,708 units of passenger vehicles during the month. Its sales however skidded 5%.

Pravin Shah, chief executive, automotive division & international operations (AFS), M&M, said in a statement, "The overall sales during the last month was subdued and the market remained challenging. With the monsoon now setting in across the country as well as the ensuing festival season, we expect positive sentiments in the coming months resulting in enhanced demand for our products."

Domestic sales of Toyota Kirloskar Motor and Nissan Motor India also grew during the month by 3.5% and 138%, respectively.

Sales of Tata Motors, Ford India and General Motors reported a decline in sales by 15.3%, 3.5% and 27.3%, respectively in July.

Despite an overall growth of 12.2%, experts cautioned that the recovery is yet to come.

Kumar Kandaswami, senior director, Deloitte Touche Tohmatsu India, said, "I want to wait a couple of months to conclude that the turnaround has happened. I would still think the last two months saw some panic buying in anticipation of tax increases and the release of some pent up demand. For sustained growth to happen, one would want to see six months of growth in disposable income over inflation and the increase in the levels of household savings."

Two-wheeler sales continued to see positive growth as most manufacturers saw increase in whole dispatches. Sales of Hero MotoCorp, Honda Motorcycle and Scooter India and Yamaha India grew by 8.7%, 33% and 36%, respectively in July.