Car sales grow 4.9% in February, passenger vehicles up 9%, Siam data shows

Domestic car sales were up 4.9% at 1,72,623 units as against 1,64,559 in February last year, according to data released by the Society of Indian Automobile Manufacturers

Sales of commercial vehicles moved up 7.34% to 66,939 units in February, Siam said. Photo: Pradeep Gaur/Mint
Sales of commercial vehicles moved up 7.34% to 66,939 units in February, Siam said. Photo: Pradeep Gaur/Mint

New Delhi: Sales of domestic passenger vehicles, a measure of consumer demand in the economy, grew for the second month in a row in February, but the pace slowed from the previous month, as the automobile industry recovers from the impact of demonetization.

Sales grew 9.01% in February to 255,359 units, according to data provided by the Society of Indian Automobile Manufacturers (Siam). In January, passenger vehicle sales had grown 14.4%.

Siam said the industry was on a path of steady recovery after the 8 November ban on high-value banknotes that hurt sales.

“Impact of demonetization is steadily waning and we expect the impact to gradually fade away in the next 1-2 months,” Siam’s director general Vishnu Mathur told reporters.

An expert said the impact of demonetization is still being felt in certain pockets of rural India where cash flow is yet to return to normal.

“...people are trying to hold back their purchases. The situation is likely to fade away in the next two to three months”, Abdul Majeed, partner and national auto practice leader at PricewaterhouseCoopers, said.

Automobile sales across segments declined 5.48% in November, the first drop in 11 months, as the note ban depressed demand for commercial vehicles and two-wheelers. Sales declined 18.66% in the following month, the most since December 2000.

“The last week of December was very good. So, by January, the dealers had finished their accumulated stocks. So, the month of January was basically a month of replenishing the dealer-based stocks and that’s why you saw 10% growth,” Mathur explained.

Domestic car sales increased 4.9% to 172,623 units in February, from 164, 559 in February 2016.

Vehicle sales across all categories, including passenger vehicles, commercial vehicles, three-wheelers and two-wheelers grew by 0.94% in February, diminishing the chances of double-digit growth in the current financial year.

Siam said the passenger vehicle industry will end the year with close to 10% growth.

“If you assume and expect that same kind of production growth will continue in March, we will see a full-year growth of 9.5% in passenger vehicles,” Mathur said.

In the 11 months to February, the passenger vehicles industry grew 9.16% to 2.76 million units.

Commercial vehicles sales went up by 7.34% to 66,939 units in February, as buyers stepped up purchases ahead of the implementation of tougher emission norms that will make the vehicles more expensive.

“Pre-buying due to BS IV (Bharat Stage IV) norms that are effective from 1 April, 2017 is helping in the growth of commercial vehicle segment,” Majeed of PwC said.

“With the implementation of GST (goods and services tax) in the next fiscal, the outlook for automotives looks better,” he added. The government plans to implement GST from 1 July.

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