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Business News/ Companies / News/  Auto sales rise for second straight month in July
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Auto sales rise for second straight month in July

July sales data suggest that a recovery may have begun to take hold in the auto sector after a two-year slump

Marutisold 90,093 units in the domestic market, an increase of 20% over the year-ago period. Photo: Pradeep Gaur/MintPremium
Marutisold 90,093 units in the domestic market, an increase of 20% over the year-ago period. Photo: Pradeep Gaur/Mint

Mumbai: Auto sales in India rose for the second straight month, according to July sales data released by individual auto makers on Friday, suggesting that a recovery may have begun to take hold in the sector after a two-year slump.

After declining for nine months, demand started picking up in June as lower excise duties and new product launches helped spur demand. The interim budget in February had lowered the excise duty on small cars, scooters, motorcycles and commercial vehicles to 8% from 12%. This was later extended by the National Democratic Alliance government in June.

Sales at car market leader Maruti Suzuki India Ltd, which sells one of every two cars in India, reflected the turnaround.

Maruti sold 90,093 units in the domestic market, an increase of 20% over the year-ago period. Sales of the company’s compact cars, including Swift, Estilo, Ritz and Celerio, rose 81% and propped up overall volumes, the company said in a statement.

The sales increase in June was partly attributed by analysts to buyers advancing their purchases in anticipation of a rollback of the excise duty cut in the July budget of the new government. The July sales increase may be signalling that a recovery is real.

“More than any other factor what we are seeing now is the result of the pent-up demand translating into sales. Post the formations of the new government at the centre, the overall sentiments have improved," said Mitul Shah, an analyst at Karvy Stock Broking Pvt. Ltd.

In a conference call with analysts after the company’s announcement of first quarter earnings on 31 July, Maruti officials said that besides strong rural sales, a revival in urban sales, which have been depressed for the last two to three years, has spurred overall sales volumes for the company.

The company’s urban sales in June, for instance, rose 13% over the same month last year. A higher proportion of first-time buyers, which account for around 40% of total sales volumes for Maruti, has also helped push up sales, Maruti executives said.

Local sales at Hyundai Motor India Ltd, the second largest carmaker, also rose 12.7% to 29,260 units in July.

“The demand pull created by the successful product launches and strong channel spread has brought down the discounts and the green shoots of growth are visible with the stabilization of macro-economic factors and near-to-average monsoons," said Rakesh Srivastava, senior vice-president of sales and marketing at Hyundai Motor India.

Indian factory activity expanded at its fastest pace in 17 months in July, a business survey showed on Friday. The HSBC Manufacturing Purchasing Managers’ Index, compiled by Markit, rose to 53 in July from 51.5 in June, its highest since February 2013. A reading above 50 separates growth from contraction.

A more sustainable recovery in car sales would be driven by a pickup in the investment cycle, salary hikes, job creation and real change in the economy, said Joseph George, an analyst at IIFL Ltd. George estimates that the car market will grow 8% in fiscal 2015.

Driven by new models such as the new City and Amaze compact sedan, sales at Honda Cars India Ltd rose 40% to 15,709 units from a year ago.

“We are extremely happy with the progress we have made in this year," said Jnaneswar Sen, senior vice-president, sales and marketing, at Honda Cars, adding that the company had received more than 10,000 bookings for its seven-seater multi-purpose vehicle Mobilio, which it launched on 24 July. Honda is now India’s third largest carmaker by sales volume.

In the absence of any new models, sales at the market leader for utility vehicles, Mahindra and Mahindra Ltd, continued to decline, albeit by a smaller margin compared with previous months. The maker of Scorpio and XUV500 saw its passenger vehicle sales decline 5% to 14,708 units in July.

“The overall sales during the last month were subdued and the market remained challenging. With the monsoon now setting in across the country as well as the ensuing festival season, we expect positive sentiments in the coming months resulting in enhanced demand for our products," said Pravin Shah, chief executive of the automotive division and international operations at the firm.

Passenger vehicle sales at Tata Motors Ltd, India’s largest automaker by sales revenue, remained weak; sales dropped 15% to 9,167 units in July. The company is hoping to turn around its fortunes in the market with two new models—the Zest sedan this month and Bolt hatchback later this year.

Among two-wheeler makers, market leader Hero MotoCorp Ltd reported sales of 529,862 units in July, an increase of 9% from a year ago. Honda Motorcycle and Scooter India Pvt. Ltd said two wheeler sales rose 33% to 389,411 units.

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Published: 01 Aug 2014, 11:45 AM IST
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