Car sales slightly up in July on low base, new launches

Written by fe Bureau | New Delhi | Updated: Aug 2 2013, 08:56am hrs
Even though car sales saw a slight pick up in July because of a low base of the corresponding month last year and pent-up demand pushing volumes, manufacturers on Thursday warned that there is not much to cheer just yet. With a weak rupee, rising fuel prices, low economic growth and high interest rates weighing down consumer sentiments, the industry expects a significant improvement in demand to only come around the festive season in September-October.

New launches have so far been the biggest saviour, with both Hondas Amaze and Ford EcoSport posting record volumes in July. More launches slated for the festival season, like Hyundais new small car and the new Skoda Octavia, are expected to create further excitement and boost industry volumes.

A low base of last year because of a shutdown of its Manesar plant after a violent labour clash led car market leader Maruti Suzuki to post a volume growth after two months in July. Sales in the month rose 6% for Maruti at 75,145 units with sales of Dzire and Alto both growing, though Swift and Ertiga volumes continued to fall.

Rival Hyundai, which undertook an annual maintenance shutdown in the month, posted a 6% drop in volumes in the month at 25,965 units, with its exports dipping by 10% at 22,739 units the company is the largest car exporter from India.

Volumes are under pressure despite attractive consumer promotion as customer and market sentiments continue to be suppressed. The frequent price increase in the fuel price on account of depreciating rupee has further increased the challenge to grow volumes, said Rakesh Srivastava, senior VP for sales and marketing at Hyundai Motor India.

Mahindra & Mahindra also saw sales dip by 29% at 15,530 units as the utility vehicle major saw a drop in demand on the back of rising diesel fuel prices over the last few months about 95% of M&Ms sales come from diesel vehicles.

The auto industry has been going through one of its worst phases in the last decade with planned shutdowns by companies to correct demand-supply mismatch. The industry is in desperate need for an immediate stimulus from the government. With interest rates remaining unchanged and the rupee plunging to new lows, lowering of excise duty is the need of the hour, which will rev up demand leading up to the festival season, M&M automotive CEO Pravin Shah said.

A drop in demand and rising inventory levels has led nearly every company, including Maruti, M&M and Tata Motors, to cut back production this year between 25% and 40%.

Tata Motors continued its sales decline that started last year with an even sharper 59% drop in July volumes at 10,824 units, while Toyota Kirloskar posted a 21% drop in volumes at 11,515 units. Sandeep Singh, deputy MD and COO, marketing and commercial at Toyota Kirloskar, said, The market continues to be sluggish and it seems we are heading for tougher times in view of the current market outlook.

General Motors, which is being investigated by the government over fudging of data used to meet emissions standards, saw sales drop 11% to 6,503 units.

Few carmarkers, however, did well on the back of new launches. Honda recorded highest-ever sales of the Honda Amaze (at 6,515 units), while its total July sales rose over two and a half times at 11.223 units. Ford also recorded highest-ever monthly sales (exports and domestic) on the back of the new EcoSport compact SUV, while domestic volumes rose 26% rise in volumes at 7,867 units. Renaults volumes went up over two-fold at 3,763 units largely on the back of high demand for the Duster compact SUV.

Among two-wheeler makers, Honda Motorcycle recorded highest-ever monthly sales with a 20% rise at 2.87 lakh units, while market leader Hero MotoCorp saw July volumes rise marginally by 0.68% at 4.87 lakh units. Yamaha Motor saw volumes rise 57% at 37,494 units in the month, while Chennai-based TVS Motor saw a 10% dip in sales at 1.26 lakh units.