Sales of scooters and motor cycles dropped for the fourth consecutive month in June as consumers deferred purchases because of high interest rates and theabsence of attractive product offerings. However, sales of cars and utility vehicles in the month grew more than sales in June 2006.
Hero Honda Motors Ltd, India’s largest two-wheeler maker, recorded a 8% decline in sales in June 2007 from the corresponding month last year and sold 255,200 vehicles in the domestic market.
Existing bike owners desirous of repurchase represent over half of all new sales.Rajiv BajajManaging director, Bajaj AutoBajaj Auto Ltd and TVS Motor Ltd, the second and third largest motorcycle makers in the country, recorded 22% and 15% decline in domestic sales, respectively, for the month, with Bajaj selling 138,949 vehicles and TVS selling 97,984 vehicles.
“This slow down was mainly due to increased (interest) cost and stringent norms being followed by retail financiers,” said TVS Motor in a statement released on Monday.
More than 60% of scooter and motorcycle sales are financed.
There has been 2-2.5% increase in the interest rateson loans to buy two-wheelers and cars.
Companies are also attributing the drop in demand for two-wheelers to declining consumer interest in the 100cc bike segment.
“Existing motorcycle owners desirous of repurchase represent over half of all new sales. There is an increasing evidence of their diminishing interest in the fundamentally unchanged 100cc motorcycles currently available, contributing significantly...towards the industry-wide slow down in sales,” said Rajiv Bajaj, managing director, Bajaj Auto in a statement.
In the passenger car segment, Maruti Udyog Ltd, India’s largest car maker, achieved 25.5% growth in June from the same month a year ago with domestic sales of 56,000 vehicles.
The company saw the highest growth rate of 46.4% in the mid-size car segment where it sold 3,923 vehicles; Maruti launched a Sedan, SX4 that competes in this segment.
Mahindra & Mahindra Ltd recorded a 50% increase in its domestic sales in June and sold 16,814 vehicles. The company also sold 2,389 units of Logan, the car it launched in a joint venture with French car-maker Renault SA.
Tata Motors Ltd, maker of the Indica car, recorded a 5.7% drop in sales in June on account of low demand for its mid-size sedan Indigo.
The demand for cars that are part of the Indigo family dropped by 13.4% in June, while demand for Indica cars grew by 4.3%.
Hyundai Motor India Ltd, recorded a 4% decline in domestic sales in June and sold 16,335 vehicles.
Analysts said that while rising interest rates were a source of concern their impact oncar sales would not be as marked as their impact on two-wheeler sales.
“The rise in interest rate would not have much impact on passenger cars. We are expecting 10-11% annual growth for the passenger car industry in the current fiscal year,” said Umesh Karne, senior research analyst, Emkay Share and Stock Brokers Ltd.
Among the other car makers, the local arm of General Motors Corp reported a 42% year-on-year growth in June, selling 4,779 vehicles and Honda Siel Cars India Ltd recorded a year-on-year growth of 27%, selling 4,503 vehicles.