Automobile sales remain tepid as festive season sets in

Automobile sales in the domestic market during September continued to present a picture of fragmented recovery even though the festive season is round the corner.

By: | Updated: March 21, 2016 12:21 PM

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Automobile sales in the domestic market during September continued to present a picture of fragmented recovery even though the festive season is round the corner. (Reuters)

Automobile sales in the domestic market during September continued to present a picture of fragmented recovery even though the festive season is round the corner.

While growth slowed to a three-month low for Market leader Maruti Suzuki at 6.8% on a year-on-year basis pulled down by a flat growth in entry level cars like Alto and WagonR; rival Hyundai Motor India and Honda Cars India, both posted domestic sales growth in excess of 20%, primarily on the back of best-selling models.

However, analysts explained the huge divide between the sales growth of Maruti and the latter two to Hyundai and Honda setting up new dealers. Since sales numbers are despatches from factory to retail outlets, any expansion in dealer network will show growth.

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With the Reserve Bank of India cutting lending rates and banks having started to pass it on to the consumers, the future recovery in sales is dependent on lower interest rates coupled with festive season purchases.

“With the interest rates coming down and inflation staying low, there is a great chance of growth picking up in the coming months of festivals. Given the pattern so far, the 6-7% growth for the year may be achieved,” Kumar Kandaswami, senior director, deloitte India said.

The slowdown in sales of two-wheelers led by motorcycles was evident during the month with even Honda Motorcycle and Scooters posting a decline, its first in the last one year. Hero MotoCorp, which saw sales declining 14% last month recovered some ground by posting a marginal growth.

What could be worrying for manufacturers like Maruti would be slowing sales of small, entry level cars, which signify that consumers in smaller towns are not buying cars. The segment having high volume cars like Alto and WagonR, grew a mere 0.1% in September. Moreover, even the compact segment which comprises cars like Swift saw a slow growth of 3.5%.

On the commercial vehicles front, Ashok Leyland posted an impressive 60.8% growth in domestic sales, while Tata Motors witnessed a contraction of 0.33% in the domestic market, mainly due to contracting volumes of light commercial vehicles. Tata Motors saw a growth of 53% in the Medium and Heavy commercial vehicles segment.

Ashok Leyland too witnessed slow growth in the light commercial vehicles segment, while Mahindra and Mahindra saw a contraction of 7.2%.

Analysts are expecting the commercial vehicle segment to perform well in the current financial year. Kandaswami expects the sector to pick-up if the government pushes investment in infrastructure and the private sector too starts investing in assets.

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