Vehicle sales crash 17% in April to eight-year low

The pre-election blues continue for the automobile sector.

The first month of the new fiscal recorded a 17% decline in passenger vehicle sales, the lowest in nearly eight years.

A liquidity crunch, pre-election uncertainty and high insurance costs have been cited as the main reasons for the fall. The PV sales dropped to 2,47,541 units in April this year, against 2,98,504 in April 2018, according to data released by the Society of Indian Automobile Manufacturers (SIAM) on Monday.

Vehicle sales across categories registered a decline of 15.93% to 20,01,096 units from 23,80,294 units in April 2018.

Total two-wheeler sales in April declined 16.36% to 16,38,388 units compared to 19,58,761 units in April 2018. Motorcycle sales fell 11.81% to 10,84,811 units as against 12,30,046 units in April previous year. Sales of commercial vehicles came down 5.98% to 68,680 units in April, SIAM said.

"In the last ten 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.

Though some inventory correction has happened, but negative factors like liquidity crunch and enhanced insurance costs continue to impact sales. "It is not only the auto sector, but even FMCG segment is also witnessing a slowdown. Discretionary spendings are being held up. Maybe things will improve after the election results and a stable government is formed. We expect things to get better in the second half," SIAM director general Vishnu Mathur said.

However, retail sales were better than wholesales in April, Mathur said.

Maruti Suzuki, the country's largest carmaker, had last month forecasted a weak growth rate of 4-8% for production and sales for the current fiscal. Last year, the company had targeted growth of 10%, but the growth was 6.1%. For April, Maruti posted a 19.61% decline in its PV sales at 1,31,385 units, while Hyundai Motors reported decline at 10.12% at 42,005 units.

Federation of Automobile Dealers Association (FADA) numbers released earlier this month showed a 2% fall in retail sales of cars and SUVs in April to 2.42 lakh units.

Two-wheeler retail sales declined 9% to 1.28 million units during April.

FADA president Ashish Kale said, "The month of April ended on a negative note. Amongst the categories, commercial vehicles and three-wheelers, which registered the highest growth during FY19 witnessed highest fall, while two-wheelers and passenger vehicles PV de-grew 9% and 2 % respectively."

The gap between retail and wholesale volumes indicate high levels of inventory in the industry. Normally, auto companies maintain an inventory of around 40-50 days, but due to correction in production, the inventory has come down from 50-90 days. FADA said there should be an ideal dealer inventory of 21 days (15 days inventory + seven days of in-transit inventory), which will help in reducing a huge cost burden and remain afloat in such challenging times.