Car sales in FY19 slowest in four years

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Updated: March 9, 2019 7:09:46 AM

In the April-February period this fiscal, PV sales have grown 3.27% at 30,85,640 units against 29,87,859 units in the year-ago period.

PV sales in the April-June quarter had clocked a 20% y-o-y growth but the trend reversed since then.

With passenger vehicle sales declining 1.11% (YoY) in February, making it the seventh decline in the last eight months, the industry will register one of its slowest growth in the last four years at around 3% in FY19. The last time the PV sales had hit a low of 3.9% was in FY15.

The sales decline in February is the seventh instance in the last eight months, with the only positive growth since July last year coming in October, auto industry body Society of Indian Automobile Manufacturers (SIAM) said on Friday.

In the April-February period this fiscal, PV sales have grown 3.27% at 30,85,640 units against 29,87,859 units in the year-ago period.

With people postponing discretionary spends like buying cars ahead of the elections, coupled with the current subdued sentiments, SIAM director general Vishnu Mathur said it was unlikely that March sales will be high. “So we are more or less looking to end the year at around 3% growth which we have witnessed so far,” Mathur said.

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In the beginning of the fiscal, Siam had projected 8-10% growth for PV sales but it was revised to around 6% after dip in sales from October onwards.

Acknowledging that their initial projections of sales during the fiscal has gone awry and prospects for the next fiscal is also not encouraging, Maruti Suzuki India’s managing director, Kenichi Ayukawa, said demand is likely to remain subdued till elections. The company which has a 51% market share in the PV segment will close the year with a growth of below 5% against its projection of around 8%. “There are no signs of revival in demand at least till elections. During the current year, Maruti’s growth will be below 5% ,” he said.

Ayukawa said that he sees some pre-buying ahead of transition to BS VI from April, 2020, which will see increased sales. This is based on the premise that since vehicles will get costlier the companies will offload the older variants at huge discounts to clear inventory.

According to N Raja, deputy MD, Toyota Kirloskar Motor, “Auto sales is witnessing a slowdown in pre- election phase in addition to factors like tight liquidity condition impacting the buying behaviour”.

PV sales in the April-June quarter had clocked a 20% y-o-y growth but the trend reversed since then. During July-September, volumes fell by around 3% y-o-y, due to floods in Kerala and high base effect. Since October, volume growth remained tepid as compulsory three-year insurance premium raised prices.

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Analysts at Nomura said retail sales have been slow and inventory seems to have increased further during February. “Wholesales are likely to remain subdued despite some improvement in retails in March due to marriage season,” they noted. Retail sales or registrations of PVs slipped 10% y-o-y in February, data collated by Siam from state transport offices showed. The data, however, did not include registrations in four states — Telangana, Andhra Pradesh, MP and Kerala.

Vehicles sales across categories were in negative in February. Analyst at Kotak Institutional Equities (KIE) said demand is still subdued across most segments due to weak consumer sentiment, which would impact industry volumes over the next few months. “We expect the weakness in volumes to continue until general elections across auto segments,” they said.

Commercial vehicles (CV) segment too remained muted in February and the worst hit was the M&HCV category, which fell 8.77% y-o-y. After over 30% y-o-y growth in the first seven months in FY19, CV volumes started dwindling since November 2018 with the management and analysts attributing this to liquidity tightening, higher interest rates and revised axle load norms.

The government last year hiked the loading limit for CVs, as a result of which fleet operators got more bandwidth to load goods and new purchases got postponed. Girish Wagh, president, CV business unit at Tata Motors said, “The market continues to exhibit subdued demand on the back of high interest rates, lagged effect of the implementation of revised axle load norms and slowing economic activity”. Retail sales in February also dipped 14.8%. However, in the April-February period, CV wholesales growth stood at nearly 20%.

Two-wheeler sales declined 4.22% y-o-y in February as prices rose due to new safety norms mandating CBS/ABS systems from April 2020. Analyst at Nomura said price hike due to new safety norms will weaken demand in the near-term. “We expect the industry to remain weak in the near-term on high inventory which have increased further and rising cost pressure by 11-15% price hike on ABS/BS6 norms,” they said. In the April-February period, growth touched 6.95% y-o-y, lower than around 15% last fiscal.

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