On fast track: Car sales pick up in March on improved liquidity, consumer sentiment

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Updated: April 11, 2019 7:24:51 AM

Fada president Ashish Harsharaj Kale said the interest rate cut by the Reserve Bank of India (RBI) would begin the positive run of auto retails.

Auto industry body Siam has a different view and has pegged a mere 3-5% growth for passenger vehicles (PVs) in FY20.

Retail sales of passenger vehicles improved in March compared to a month earlier, indicating slight improvement in consumer sentiment and liquidity availability, according to the Federation of Automobile Dealers Associations (Fada).

Fada president Ashish Harsharaj Kale said the interest rate cut by the Reserve Bank of India (RBI) would begin the positive run of auto retails. “The enquiry’s de-growth has not been as much as actual retail sales and although the current customer sentiment is negative-to-neutral for purchase decision, consumer’s interest towards automobiles still remains reasonably robust,” Kale said.

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Auto industry body Siam, however, has a different view and has pegged a mere 3-5% growth for passenger vehicles (PVs) in FY20. “Continued impact of higher cost, expected below-normal monsoon and general election-related uncertainties are likely to affect sales,” Siam president Rajan Wadhera said early this week.

Registrations or retail sales of cars grew 5% in March against February, while that of two-wheelers rose 10% month-on-month (m-o-m). Commercial vehicles grew 2% in March. The data has been collated from 1,170 out of 1,441 regional transport offices.

Fada said production cuts taken by automakers in March had resulted on lower inventory at the dealers. Two-wheeler inventory levels have come down to around 50 days from 80 days earlier, while PV inventory is down to 40-45 days against 55-60 days. Almost all the carmakers and two-wheeler companies had cut down production in March as poor demand led to record high inventories.

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Analyst said volumes would likely be subdued due to increase in vehicle prices on account of BSVI norms and weaker consumer sentiment. “FY20 could also be a challenging year for the sector due to transition to BSVI norms from April 1, 2020,” analyst at Kotak Institutional Equities noted.

In FY19, retail sales of PVs rose 3.68%, against nearly 7% growth in the previous fiscal. Commercial vehicle registrations jumped 22% in FY19 while two-wheeler volumes grew 9.59%, against around 15% in FY18. Passenger vehicle segment posted its worst performance in five years, ending FY19 with only 2.7% growth, as higher fuel prices, lack of credit availability and increase in insurance costs affected demand. The worst hit was the scooter demand, which grew at the slowest pace in 14 years. Scooter sales fell 0.27% last fiscal. This was the first drop in the segment since a 1.45% decline in FY06.

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