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Fuel costs, interest rates hit Maruti sales

Fuel costs, interest rates hit Maruti sales
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First Published: Mon, Aug 01 2011. 11 15 PM IST
Updated: Mon, Aug 01 2011. 11 15 PM IST
Mumbai: MarutiSuzuki India Ltd, the country’s largest car maker, reported a huge decline in monthly sales in July on account of high interest rates, rising fuel costs and operational issues.
Sales at the local arm of Japan’s Suzuki Motor Corp. shrunk one-fourth from a year earlier to 66,504 units, the company said. The last time it showed a 26% fall was in November 2008.
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Sales in every segment declined, said Mayank Pareek, managing executive officer, marketing and sales, Maruti Suzuki.
Maruti stopped producing the Swift hatchback, of which it sells 12,000 units a month, to make way for a new version due next month. The company also shifted production of its mid-sized sedan Dzire, which averages 9,000 units a month, from its Manesar factory to Gurgaon. These factors contributed to the decline, according to Pareek.
Sales slumped at India’s second and third largest carmakers as well.
Hyundai Motor India Ltd’s sales fell 11% to 25,642 units over a year earlier. At Tata Motors Ltd, sales of passenger vehicles slipped 38% to 17,192 units, dragged down by the Nano small car, which declined 64% to 3,260 units.
A month after hiking the petrol prices by Rs5 per litre to Rs63.37 in Delhi, the government raised diesel prices by Rs3 per litre in June, to Rs40.75 per litre in the capital. The demand was further hit by a 0.5 percentage point hike in policy rates last week by the Reserve Bank Of India.
The hike, the 11th since March 2010, is likely to make auto loans dearer. More than 75% cars are bought on credit in India. Interest on auto loans has gone up by 3 percentage points from April 2010 to June, according to lobby group Society of Indian Automobile Manufacturers.
Sales at utility vehicle market leader Mahindra and Mahindra Ltd, however, expanded at a brisk pace. The company sold 37,323 units of utility and commercial vehicles and cars in July, 42% more than a year earlier.
New models in the light commercial vehicle segment and a diesel-heavy portfolio helped Mahindra beat the industry trend, said Vineet Hetamsaria, analyst at Pinc Research.
Tata Motors, too, has several diesel models, but the company needs to think of new brand names to attract buyers, Hetamsaria said. “They (buyers) continue to associate the existing brands—Indica Vista, Manza—with the taxi segment,” he said.
Maruti’s Pareek said he expects the festival season, which begins in November, and new launches to restore buoyancy in the car market.
The launch of new models helped carmakers with smaller market shares, including Volkswagen India Pvt. Ltd, Nissan Motor India Pvt. Ltd and ToyotaKirloskar Motor India Ltd, increase sales.
Two-wheeler sales, which are less sensitive to fuel costs and interest rates, also grew.
“The fall in volumes clearly manifests weakening consumer sentiment over rising cost of car ownership. Model launches, along with the onset of the festive season, will, however, revive sales growth in the second half of 2011-12,” said Sridhar Chandrasekhar, head, Crisil Research.
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First Published: Mon, Aug 01 2011. 11 15 PM IST
More Topics: Maruti | Suzuki | Auto | Car | Sales |