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  1. Little festive glitter: Weak retail sales begin to worry auto makers

Little festive glitter: Weak retail sales begin to worry auto makers

With inventory levels of passenger vehicles with dealers crossing the 4-6-week mark, manufacturers are keeping their fingers crossed regarding sales prospects during the October-November festival season.

By: | New Delhi/mumbai | Published: September 12, 2018 6:06 AM
auto makers, GST, SIAM, Tata Motors, Rival Hyundai Motor India , TVS Motor, Maruti Suzuki India The steady rise in the price of auto fuels though has not worried manufacturers as they say that it lead to less usage and not dent purchases. (Reuters)

With inventory levels of passenger vehicles with dealers crossing the 4-6-week mark, manufacturers are keeping their fingers crossed regarding sales prospects during the October-November festival season. Manufacturers FE spoke to said that sales inventory of 4-6 weeks with dealers is normal but once it goes past that, it means that retail sales are weak, which is currently the case. For the first time in the current calendar year, manufacturers seem worried.

Sales during August slid because of floods in Kerala and a few other states, and manufacturers were unable to shift demand to other regions. Since the period of shraadh is observed in September in much of the country during which new purchases are considered inauspicious, manufacturers are not very hopeful of sales picking up during the current month.

“If retail sales do not pick up, dealers may not be ready to accept fresh despatches for the festival season, in which case it will be a big dampener. However, we are hoping that nothing untoward happens and festival season sales are back to normal,” an industry executive said. “However, at this stage it is a bit early to forecast,” he added.

“There is an impact of a high base effect, as sales last year from July to September were high after GST (goods and services tax) implementation,” Society of Indian Automobile Manufacturers (SIAM) director general Vishnu Mathur said on Tuesday while releasing industry sales figures for August. He said that sales were affected due to floods, especially in Kerala, which is a big automotive market.

Apart from passenger vehicle sales, the prospect for two-wheelers is also under stress. Both Kerala and West Bengal are big markets for two-wheelers and while the former is affected by floods the latter has brought about a regulation that makes having a driving licence a must to purchase a vehicle. This has hit sales. For instance, average monthly sales of two-wheelers in West Bengal ranges between 90,000 and 100,000 units but in August it was as low as 38,000 units.

The steady rise in the price of auto fuels though has not worried manufacturers as they say that it lead to less usage and not dent purchases. “Past data do not show an inverse relationship between a rise in fuel prices and a decline in vehicle sales,” an executive said.

Prospective demand for commercial vehicles too remains strong though due to a low base as well as growth in the infrastructure sector. “Considering how this segment has grown above expectations, we are looking at having a re-look at our forecast for an upward revision,” SIAM deputy director general Sugato Sen said.

SIAM had earlier projected that the commercial vehicle segment could grow around 10-12% this fiscal. However, in the April-August period, the segment grew by 41.67% to 3,91,260 units against 2,76,182 units in the year-ago period. Meanwhile, in August domestic passenger vehicle sales declined for the second month in succession with a 2.46% drop compared to the same month a year earlier. Car sales declined 1.03% to 1,96,847 units.

In August, Maruti Suzuki India posted a 3.55% decline in passenger vehicle sales at 1,45,895 units. Rival Hyundai Motor India also saw a 2.76% dip to 45,801 units. Tata Motors, however, posted a 24.98% jump in its passenger vehicle sales at 20,323 units. Motorcycle sales grew 6.18% to 12,06,512 units, while scooter sales were marginally down at 6,69,416 units versus 6,73,444 units in August last year.

Overall, total two-wheeler sales were higher by 2.91% at 19,46,811 units. In the motorcycle segment, Hero MotoCorp posted a 1.29% increase to 5,91,401 units while Bajaj Auto saw its sales jump by 27.25% to 2,18,437 units. Honda Motorcycle and Scooter India (HMSI) recorded a 4.9% increase in its bike sales to 2,01,348 units. In the scooters segment, HMSI saw sales dip by 4.66% to 3,75,901 units, while TVS Motor posted a 9.8% increase to 1,20,198 units. Hero MotoCorp’s scooter sales in August were at 71,639 units, down 7.73%. Sales of commercial vehicles jumped 29.56% at 84,668 units.

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