Mumbai: Year-end discounts and freebies failed to prop up December auto sales during the month as weak economic sentiment, coupled with high interest rates and fuel prices, kept buyers away in the world’s second-fastest growing market.
Analysts expect auto sales to turn the corner only in the second half of calendar 2013 as most car makers on Tuesday, with the exception of utility vehicle market leader Mahindra and Mahindra Ltd, reported sluggish sales growth for December.
“Volume pressure will continue to remain,” said Yaresh Kothari, analyst at Angel Broking India Pvt. Ltd. Kothari expects passenger car sales to expand merely by 3-4% in 2013-14. In the current fiscal year, passenger car sales are expected to grow at 8-10%.
In the first eight months of fiscal 2013, sales of cars and sport utility vehicles grew 9.62% to 1.75 million units, largely on the back of higher demand for utility vehicles, according to the Society of Indian Automobile Manufacturers. In the same period in 2011-12, sales declined 0.5%.
Siam (Society of Indian Automobile Manufacturers), in October, lowered its growth forecast for 2012-13 to 8-10% from the 11-13% forecast it announced at the beginning of the year.
Hyundai Motor India Ltd, the country’s second-largest passenger car maker by sales, saw its sales decline 9.6% over the last year to 26,697 units.
At Tata Motors Ltd, passenger vehicle sales in December fell by about half to 14,185 units from 28,916 units sold a year earlier. Sales at Toyota Kirloskar Motor Pvt. Ltd dropped 24% to 12,071 units.
Maruti Suzuki India Ltd, the market leader in passenger cars, will release sales numbers on 3 January. The company expects to report a 5% expansion in domestic sales, said Mayank Pareek, managing executive officer (marketing and sales) at Maruti Suzuki. It sold 77,475 cars in the domestic market in December 2011.
Maruti has cut its forecast for the passenger car market to four million units by 2015-16, from its earlier projection of five million, Mint reported on 11 December.
Even as the country’s central bank holds out hope for a rate cut in its monitory policy review on 29 January, car firms expect auto sales to remain muted in 2013. They now pin hope on the Union Budget to be presented in February to bolster the economy and revive buyer sentiments.
“Unless the quantum of rate cut is 150-200 basis points, it’s unlikely to have a significant impact on the cost of borrowing,” Pareek said. “We don’t see the demand reviving unless the economy improves.”
One basis point is one hundredth of a percentage point.
Maruti’s sales in recent months have been primarily led by the Ertiga, a multi-purpose vehicle launched in October, and the new Dzire. Both models have waiting periods of three-four months, Pareek said.
“The only hope now is on a good Union Budget to address some of the concerns of the industry, combined with the announcement of some positive measures to bolster the economic recovery,” said P. Balendran, vice-president at General Motors India Pvt. Ltd.
Despite a string of year-end offers in the form of discounts and schemes, sales declined 22% to 7,067 units at the local arm of the US auto maker.
Bucking the downtrend, sales at Mahindra and Mahindra in December expanded at a brisk pace. The maker of Scorpio, Xylo and Bolero models had its sales pace up 15% to 22,761 units compared to a year ago. The Quanto—a so-called compact SUV—and other new models like XUV 500 contributed to the growth. The Mumbai-based firm is the only auto maker that has been delivering consistent sales performance month-on-month.
In a bid to make way for the new calendar year models and clear existing stock, auto makers typically offer discounts and freebies every December. The quantum of discounts were higher in 2012, said Kothari of Angel Broking. For instance, Maruti offered discounts of Rs.18,000-20,000 on its petrol models. This was higher by Rs.8,000-10,000 compared to last year, said Kothari.
Two-wheeler firms, too, saw sluggish sales in recent months. Hero MotoCorp Ltd, the world’s largest two-wheeler maker, sold 541,615 units in December, lower than the 540,276 units it sold a year ago. Domestic sales at TVS Motor Co. skidded by 8% to 134,566 units, while sales at India Yamaha Motor Pvt. Ltd rose 1.4%, to 348,406 units.
Bajaj Auto Ltd and Honda Motorcycle and Scooter India Pvt. Ltd will release sales figures in the week ahead.
The auto index of BSE Ltd, comprising 10 companies, rose 0.86% to close at 1,524.83 points on Tuesday, even as the bourse’s benchmark index, Sensex, rose 0.79% to close at 19,580.81 points.