After a modest improvement in October, passenger vehicle sales fell by an estimated 4% year-on-year (y-o-y) in November as the festival season got over and many manufacturers pulled out part of the discounts from the market. The fall in despatches in November 2019 also stems from the fact that this year the Diwali season, when around 40% of the festive season sales happen, fell in October. In 2018, Diwali was celebrated in November. The decline in volumes in November, however, was still less pronounced compared to the last 11 months when the sales witnessed a fall of over 20% y-o-y.
Maruti Suzuki reported a 3.2% y-o-y decline in volumes at 141,400 units in November, again falling into the negative territory. In October 2019, the country’s largest car maker had posted a 2.5% y-o-y increase in despatches to dealers, after 11 months of continued decline in volumes. So far this fiscal, Maruti’s volumes have fallen 21% y-o-y. Chairman RC Bhargava said usually the festive season sees highest monthly sales during the year and thereafter demand slows down. “During December, it is expected sales may improve as manufacturers offer year-end discounts to clear the old stock,” Bhargava told FE.
While volumes of Hyundai grew by a marginal 2% y-o-y at 44,600 units on account of sustained demand for new launches including compact SUV Venue and hatchback Grand i10, Mahindra & Mahindra (M&M) and Tata Motors reported 10% y-o-y and 39% y-o-y dip in wholesales, respectively.
Vikas jain, national sales head at Hyundai Motor India, said despite the ongoing market challenges, there was a demand for cars, including Venue, Creta and Grand i10. Unlike some other manufacturers, Hyundai continued extending consumer offers like extended warranty and hefty exchange bonus.
Veejay Ram Nakra, chief of sales and marketing, automotive division at M&M, said the month after the festive season is historically a lean one for the automotive industry. "Consumer demand, especially for passenger vehicles, typically picks up in the year-end that is in December," Nakra said.
Analysts believe a sustained improvement in demand may take time as prices are expected to further go up on account of BS-VI emission norms. "Most OEMs, in our recent interactions, remain uncertain on improvement sustainability given a weak economy and upcoming BS-VI emission norms," analysts at CLSA said.
Referring to their interaction with the Maruti management, the analysts said the company executives have given an indication that the customer interest seems to be holding up in November but buyers might await end-of-year discounts in December.
FE had on November 28 reported that carmakers have silently withdrawn part of the fire sale offers on most of the models post the festive period in October, given that the inventory has come down to normal levels. Following a year-long slowdown in demand due to several factors which increased car prices, manufacturers offered highest-ever discounts since July-August 2019 to boost sales and clear the excess inventory which had piled up from the festival period of 2018, owing to poor retail demand. The discounts helped the companies bring down the BS-IV stock to comfortable levels following aggressive production cuts in the past nine months and before they prepare to launch BS-VI compliant vehicles from January 2020.
Analysts at Axis Capital believe complete recovery in demand may still take time and robust October sales happened only due to highest ever offers. "This uptick was driven by bunching up of demand and push factor of high discounts offered by OEMs. We also believe that sustained recovery will take time," they wrote.
Demand for commercial vehicles was worse as sales fell by an estimated 20%, impacted by plant shutdown by manufacturers and limited production done to match retail demand with the supply. This was the 11th consecutive month when CV sales remained subdued, impacted by the revised axle load norms and costlier finance options. The government last year hiked the loading limit for CVs by 15-20%, as a result of which fleet operators got more bandwidth to load goods, impacting the new purchases.
While M&M reported a 10% y-o-y decline in despatches, Tata Motors' sales were down 17% y-o-y in November.
Girish Wagh, president, CV business at Tata Motors, said retail sales were better than wholesales by over 10%. "As we move closer towards BS-VI transition, focus continues to be gradual stock reduction," he said.
Analysts at Nomura said weak demand and inventory de-stocking before BS-VI is likely to keep wholesales subdued. "Heavy commercial vehicle volume decline in November is likely to remain high due to weak demand and inventory clearance," they noted.