Auto sales warm up, but forecast stays cold

Lady luck seems to be smiling again on Indian auto sector. Domestic car sales grew for the first time in five months in November, rising 7% year on year, data released by the Society of Indian Automobile Manufacturers (SIAM) on Thursday showed.
Sales for the month stood at 171,131 units as against 159,939 units in the same month last year. 

The gains are mainly driven by market leader Maruti Suzuki, which has managed to shake off its recent labour unrest and attained full production. But the turnaround is unlikely to rescue the industry as chances are high that firms will miss out even on the modest growth forecast of 2-4% this fiscal.

“The growth in November is still not enough to revive the industry. We don’t expect to meet our forecast of 2% to 4% growth in car sales for this fiscal and we may revise the forecast in January,” Sugato Sen, senior director at SIAM, said. In October, SIAM downgraded its growth outlook for car sales to 2-4% from its earlier projections of 10-12% in July and 16-18% in April.

The industry body doesn’t expect much fireworks, going ahead. This assessment has much to do with customers typically waiting to get the new chassis number in the new year and postponing their decision to buy vehicles to January. Many car companies, including Maruti and Ford India, are trying to break this trend by announcing price hikes in January so that buying cars in December becomes much more lucrative.

It’s not that November cheered all carmakers. Sales in the entire mini car segment fell — mini cars are hatchbacks with engine displacements of up to a litre. Production went up marginally to 71,074 units (70, 298 units) whereas sales dropped to 52,502 units (63,269 units). Chevy Spark, combined sales of Maruti’s M800, A Star, Alto and WagonR reported declines. And two of India’s biggest car markers saw sales plummet even in the compact segment (engine displacement between 1 and 1.4 litre).

Maruti’s Ritz, Swift and Estilo were down to 22,159 units (23,014 units) whereas Hyundai’s i10, Getz and i20 slid to 17,322 units (21,845 units). Sales of the Accent too skidded, to just 682 units from 1,192 units in the same month a year ago. Honda City was down to just 652 units (3003 units), perhaps because the new City is being launched next week and production of the older model is already curtailed. GM’s Aveo sold only 84 units (291 units).

But there seems to be distinct preference for diesel cars, whose demand has soared vis-a-vis petrol powertrains. Sen said the market share of diesel cars is expected to cross the 33% mark this fiscal from 27% till last year.

Not just cars, some segments in two wheelers are also showing signs of a slowdown.

Though there is a definite uptrend for scooters, both scooterette (up to 75cc) makers — Mahindra Two Wheelers and TVS Motor Co — reported lower production and sales in November.
 
Total scooterette output fell to almost half at 1,491 units (2,147 units) and sales also declined to 982 units (1,934 units).

Honda Motorcycle & Scooter India (HMSI) as well as TVS took a knock in the 125-250 cc motorcycle range. HMSI produced 15,967 units (16,055 units) and sold 12,298 units (12,478 units) whereas TVS sold 32,731 units (36,376 units).

Higher fuel costs, expensive loans and prolonged inflationary pressures in a slowing economy have forced customers to put off vehicle purchases, and the overall vehicle demand was subdued even in festive months of September and October.