Car sales juggernaut on a roll; Maruti Suzuki, Hyundai in driver’s seat

Sales could clock double digit growth in first quarter of the current fiscal, say experts

By: | Updated: June 28, 2016 8:29 AM
auto sales Car sales are moving at a fast clip despite the prolonged Jat agitation in Haryana, a ban on diesel vehicles in the National Capital Region (NCR) and the fire at one of the manufacturing units of a vendor (Reuters)

Car sales are moving at a fast clip despite the prolonged Jat agitation in Haryana, a ban on diesel vehicles in the National Capital Region (NCR) and the fire at one of the manufacturing units of a vendor. In fact, had it not been for capacity constraints at the units of the country's top two car manufacturers — Maruti and Hyundai — business might have been even more brisk.

Maruti’s third plant in Sanand will start operations by January and to cope with the shortfall in capacity it has reduced the production of WagonR and Swift catering instead to the increasing demand for the Baleno and Vitara Brezza. Both the Baleno (a premium hatchback) and the Vitatra Brezza (compact SUV) now have a waiting period of six months.

Sales could clock double digit growth, in the three months to June, say market watchers driven by the good performance from models launched last year and renewed interest in the sports utility vehicles, especially the compact SUV sub-segment.

In the first two months of FY 17, passenger vehicle sales have grown by a smart 8.65% y-o-y to 4,73,700 units compared to 4,35,973 units during the same period in FY16. Passenger car volumes for June, automobile analysts forecast, could be around 8-9% up y-o-y or in the region of 2,35,000 units.

Earlier this year, the Supreme Court re-instated the ban on the registration of new diesel vehicles in the NCR which adversely impacted sales of utility vehicle manufacturers like Mahindra and Mahindra (M&M) and Toyota.

The automobile industry lost significant volumes in Haryana due to the Jat protest for reservation in government jobs. Some of the dealers also suffered damage at the showrooms. Last month Maruti Suzuki lost production volumes as a fire broke out in the manufacturing capacity of one of the component suppliers Subros — a car air conditioning machine marker — which may have impact on the Maruti’s monthly volumes in June and beyond.

“Maruti’s constrained capacity has been prioritised toward the recently launched Baleno, Vitara Brezza and S-Cross. Consequently, the sale of vehicles priced above R5,00,000 and now forms 41% of Maruti’s sales,” said Mihir Jhaveri and Siddharth Jha of Religare Institutional Research in a note on the sector.

French car maker Renault also faced noise-related issues with the engine of its successful small car Kwid and as a result the car maker had to stop manufacturing the engines for a couple of weeks in May. The launch of Datsun Redi GO was also postponed by a couple of months as the vehicle shared the same engine.

“Despite of challenges beyond their control, car manufacturers have been able to overcome the tides with introductions of new models and by enhancing production of models and reducing the waiting time. Some manufacturers have increased consumer offers especially on traditional products and diesel cars,” said Puneet Gupta, associate director of IHS Automotive.

Hyundai has been running the Chennai plant on a 100% utilisation rate. The South Korean car maker has increased the production of Elite i20 and Creta. According to experts the resurgence of the utility vehicle segment on the back of new models like Creta, TUV 300, KUV100 and Vitara Brezza has helped push up volumes.

In April the utility vehicle segment grew by a 42.83% y-o-y to R62.170 and in May the volumes in the segment grew by 35.88% y-o-y to 58793 units. In June also UV segment is expected to grow more than 30% y-o-y.

The top three car manufacturers — Maruti, Hyundai and M&M — have been driving the volume growth in the market with other manufacturers lagging behind.


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