After the carmakers reported subdued wholesales dispatches for the month of October, industry experts feel that turnaround for the industry could be still some time away.
The four-wheeler segment, which was reeling under a slowdown for the past 2 years, saw sales growing since May onwards this year on account of improved sentiment with the new government at the centre and some signs of recovery in the economy. Sales numbers grew in double digits in months like June, July and August after many months of slowdown.
While the growth in wholesale dispatches for the industry reduced to single digit in September, the month of October saw decline in numbers in spite of the festive month. The month was disappointing for most of the manufacturers, including the biggies like Maruti Suzuki, Mahindra & Mahindra etc.
Sales of Maruti Suzuki - the biggest carmaker were flat in October compared to same month last year with just 1% growth. Barring Hyundai Motor India and Honda Cars India, which grew 5.6% and 18% respectively, all other manufacturers reported a decline in wholesale dispatches. As per the numbers released by top 9 manufacturers, the car sales declined by 4% during the month.
Manufacturers may have over-hyped the positive sentiment post the elections, feel the experts. "In spite of the fact that all the major festivals fall in October, the numbers were subdued. It seems that November will be poor because last year's Diwali was in November. Hence there is likely to be some effect. The positive sentiment was hyped and manufacturers did a lot of pre-festival stocking, leading to high numbers in August and September," said Nikunj Sanghi, past president of Federation of Automotive Dealers Association (FADA).
"We expect the stress will continue for the next 6 months at least," he added.
"Expectations were high, and hence the manufacturers had built up the inventories. Factors like high interest rates are still a deterrent. Hopefully the RBI would take some steps in bringing the interest rates down. But clearly the sentiments due to Modi-wave are fading away," said Puneet Gupta, associate director, IHS Automotive Sales Forecasting.
Non-working days and no production days by manufacturers like Maruti Suzuki in October may have also impacted the overall numbers, experts pointed.
"Even though the lower fuel prices are encouraging, the market is not showing any movement apart from new entries. Even the festival season did not bring the expected momentum in the market. The turnaround of the automobile sector is still not visible in the short-term," said P Balendran, vice president, General Motors India.
Maruti Suzuki recently cautioned that the industry demand is still not broad-based yet. "Next 6 months could be tough, we would see the actual demand coming back in the next fiscal," said a company executive while talking to analysts post its Q2 results. It further said that the discounts on cars are at all time high currently. "The discounts can only be reduced once the actual demand comes in place," he added.
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