The company posted a 27% y-o-y decline in M&HCV segment and 5% y-o-y dip in light vehicles segment.
After two months of subdued sales, automakers are optimistic about a turnaround in the final quarter of the current financial year, though they are cautious that there may not be a significant change due to high base of last year.
The festive season of Dussehra and Diwali was the primary setback to the auto industry with a host of factors occurring at the same time, including increase in oil prices, commodities and interest rates, Pawan Goenka, managing director, Mahindra & Mahindra (M&M), told a business news channel.
M&M reported a 3% year-on-year (y-o-y) decline in passenger vehicle volumes for December.
“Since most companies were clearing inventories in November-December, in my sense, everyone has come down to the level of inventory where we wanted it to be by the end of December. Therefore, January-March should see true reflection of demand,” he said.
Vehicle sales across segments remained under pressure in December as high interest rates and insurance cost kept buyers on the back foot. Despite hefty year-end discounts — higher by 20-25% in previous years — wholesale volumes of top carmakers grew only around 2% y-o-y.
Two-wheeler volumes also remained lacklustre with Hero MotoCorp and Royal Enfield posting 4% and 13% y-o-y decline, respectively, in wholesale volumes in December, 2018, mostly due to significant hike in third-party insurance premiums. TVS Motor Company registered a marginal 1% growth in domestic two-wheeler sales. Bajaj Auto, though, was an exception which reported 39% y-o-y rise in volumes, albeit on a low base.
“The increased cost of two-wheeler insurance ahead of the Diwali festive season and the prevailing liquidity crunch in the market impacted the overall momentum of growth in the industry during the entire third quarter,” said Pawan Munjal, chairman, Hero MotoCorp, in a company release.
Analysts also believe that although industry should have performed better in December, January-March quarter should see better numbers for domestic motorcycles and the industry should get back to 10-15% growth.
Commercial vehicle segment saw its second consecutive month of decline in December after several months of positive momentum. Volumes for Tata Motors fell by 11% y-o-y with the management attributing this to liquidity tightening, higher interest rates and rising fuel costs. The company posted a 27% y-o-y decline in M&HCV segment and 5% y-o-y dip in light vehicles segment.
According to Goenka, axle load norms impacted demand in heavy commercial vehicle segment but the impact would fade away in the next couple of quarters. M&M reported a 31% y-o-y decline in heavy vehicle segment and 9% fall in LCVs.
For Ashok Leyland, volumes fell by 20% in December. Analysts at Nomura had observed — post the release of November wholesale data — that while the tipper segment had continued to do well on healthy construction demand, cargo sales had been impacted due to weaker consumer sentiment, higher capacity on increased axle loads and reduced small freight operator profitability.