Car sales show double-digit growth after 20 months in June, but industry yet to declare turnaround

Written by fe Bureau | New Delhi | Updated: Jul 10 2014, 00:22am hrs
Car salesCar sales increased 14.76 per cent to 1,60,232 units in June as compared to 1,39,624 units in the year-ago month.
Passenger vehicle (PV) sales, which includes car, utility vehicles and vans, have recorded a double-digit growth - 11% YOY to 2.18 lakh units - after a 20 month gap in June this year. But industry body Society of Indian Automobile Manufacturers (SIAM) is not yet ready to declare a turnaround, opting instead for a cautious outlook for the 2014-15 fiscal.

Sales, in fact, had come back to black in the previous month of May when PV volumes went up almost 3% to 2.07 lakh units on the back of positive consumer sentiments. While fears that February's 4-6% excise duty cut would end in June helped boost demand in the month the cuts have now been extended till December 31, growth also come from the optimism that economic growth will return under the new NDA government that came to power in a landslide victory in mid-May.

Vikram Kirloskar, president, SIAM said, Sales increased in June due to speculative demand. Consumers were uncertain whether the excise concessions would be extended and so they advanced purchases. We have to wait for some more time to see whether the turnaround seen in May and June is definite.

PV sales had last seen double-digit jump in October 2012 when volumes went up 32% largely because of Maruti Suzuki's low base (a labour strike in October 2011 had reduced output). Before that, PV sales rose 10.79% in July of the same year.

Kirloskar, however, warned that car prices may soon rise as heavy discounting and rising raw materials costs takes a toll on company margins. Discounts are tapering and the industry cannot afford it. Cost of raw material is increasing and car makers need to make money to reinvest, he said.

SIAM in its presentation said that high interest rates, deficient monsoons and volatile foreign exchange rates could play spoilsport for the industry's growth hopes. On the positive side though, there is expectation that speeding up of infrastructure projects like roads, further opening up of FDI and re-start of mining activities will boost demand, especially for the commercial vehicle segment that continues to remain in the red.

In June, passenger car sales went up almost 15% to 1.60 lakh units, while utility vehicle volumes rose 7% to 43,849 units. Market leader Maruti Suzuki saw a 31% jump, while Hyundai and Honda Cars posted 9.5% and 75.5% higher sales. Mahindra saw sales drop 6.5%, while Tata Motors recorded a sharp 39% drop.

In two-wheelers, overall growth in June stood at 13% to 12.61 lakh units. Hero MotoCorp saw June volumes rise almost 8%, while Honda Motorcycle & Scooter saw a 28% rise. TVS also recorded a 23% growth, though Bajaj saw volumes dip 7.5%.

Though commercial vehicle have been showing a month-on-month improvement since January this year, it continued to remain in the red in June, declining 9% YOY to 51,119 units. Tata Motors saw CV volumes drop 22.5%, while Mahindra and Ashok Leyland saw 11% and 3% growth, respectively.