Consumer slowdown continues to hit car sales; Mahindra, Maruti, Honda, others bear the brunt

The ongoing consumer slowdown is also affecting car sales with major players reporting double-digit losses.

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A gauge of automobile companies has fallen 30 percent since reaching a record in December 2017.

The ongoing consumer demand slowdown has claimed yet another victim in slowing car sales with automobile demand continuing to be sluggish, says a report. “Auto industry performance continues to remain under pressure led by weak retail sales due to weak consumer sentiment,” Kotak Institutional Equities said in a research report. However, this is not the only reason behind the flat growth. The hike in vehicle prices due to regulatory changes and high financing costs have also contributed to the same, the report co-authored by Hitesh Goel, Nishit Jalan and Rishi Vora said. With this, two-wheeler industry volume growth is expected to continue going down south on a yearly basis.

The volume of passenger vehicle industry sales fell by double-digit on a yearly basis in May 2019. Several big players such as Maruti’s overall volumes declined 22% year-on-year which is the worst decline in the past eight years. “Entry and compact hatchback/sedan car segment volumes declined by 25%,” the report observed. Volumes of Maruti’s Ciaz declined by 11% year-on-year, while those of SUV slipped 25%. The van segment fell down by  30% on a yearly basis.

Also Read: Consumer slowdown not just in India, growth slowed worldwide; real reasons revealed

Among other players, domestic volumes of Honda declined by 28% and Hyundai continued its downtrend with domestic volumes down 6% year-on-year. Toyota’s PV volumes skid by 7% and Tata Motors’ domestic personal vehicle volumes went down by 38% in May 2019. On the other hand, Mahindra saw a massive decline of 22% in its export volumes and Tata Motors reported 20% year-on-year decline in domestic CV volumes, the report said.

Meanwhile, another recent Kotak Institutional report had earlier said that the slowdown first witnessed in real-estate and housing segment 10 years ago had trickled down to car sales 4-5 years ago and now has moved to Fast Moving Consumer Goods (FMCG) in the last quarter. Another Kotak report claimed that it is not a temporary blip if FMCG giants such as HUL, who are generally cautious of what they say end up saying “FMCG is recession resistant, but not recession proof”. The ongoing slowdown became evident after giant players, both domestic and international, acknowledged slowdown post dismal quarter results.

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