Back on track: Car sales improve in May, 2-wheelers remain subdued

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Updated: June 15, 2019 7:10:24 AM

Demand was affected by hike in insurance premium in September 2018 and subsequent price hikes taken by companies on April 1 on account of new safety norms. Manufacturers increased prices in the range of `500-7,000 on account of safety features installed.

Commercial vehicle (CV) retail volumes fell 8 % yoy, according to the FADA data.Commercial vehicle (CV) retail volumes fell 8 % yoy, according to the FADA data.

Retail sales or registrations of passenger vehicles increased slightly in May, indicating change in consumer sentiment, according to the Federation of Automobile Dealers Associations (FADA). Car sales in May was down by a marginal 1% year on year (yoy). Since December 2018, registrations have been falling in the range of 3-9% yoy.

FADA president Ashish Harsharaj Kale said PV retails picked up in May and it could have been better but May 2018 had a high base. “May 2018 witnessed second highest registrations on a monthly basis fuelled by wedding season and some new launches,” Kale told FE.

Despatches by top five carmakers, including Maruti Suzuki and Hyundai India, fell sharply in May — the steepest decline seen in at least 18 years — as manufacturers trimmed production because of poor demand and higher inventory from the previous months piled up with dealers.

Analysts said higher prices and selective financing by NBFCs had kept customers away. Since the second half of the previous financial year, car makers have raised prices at least twice to offset the increasing raw material costs and new features provided to comply with the safety norms. “We expect the industry to remain weak in the near-term on account of high inventory and rising cost pressure by price hike due to safety norms,” analysts at Nomura wrote.

Two-wheeler registrations continued to remain sluggish, falling nearly 9% yoy due to lack of finance availability and hike in prices on account of new features provided to comply with safety norms. Wholesale despatches, too, fell nearly 7% yoy dragged down by steep decline reported by companies, including Hero MotoCorp and Honda Motorcycle.

Demand was affected by hike in insurance premium in September 2018 and subsequent price hikes taken by companies on April 1 on account of new safety norms. Manufacturers increased prices in the range of `500-7,000 on account of safety features installed.

FADA’s Kale said inventory of two-wheelers had again gone up to 60 days. “With the current liquidity, both for consumer and dealer still in a tight situation, the near-term outlook of four-six weeks continues to remain negative,” he added.

Commercial vehicle (CV) retail volumes fell 8 % yoy, according to the FADA data. Analysts said purchases were getting postponed because of slowdown in infrastructure projects. Besides, relaxation in load axle norms continues to impact demand despite healthy traction in the tipper segment, analysts at Nomura noted.

Inventory of CVs continue to range from 45-50 days, similar to April and March numbers. CV volumes started dwindling since November 2018 after the government hiked the loading limit for CVs, as a result of which fleet operators got more bandwidth to load goods and new purchases are getting postponed.

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