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Business News/ Industry / Banking/  Auto firms end FY15 on a high, wary of road ahead
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Auto firms end FY15 on a high, wary of road ahead

Four of top five auto makers reported larger dispatches to dealers in March; experts cautious on rural growth in FY16

Maruti Suzuki India Ltd, India’s largest car maker by sales, sold 103,719 units in the domestic market in March, up 1.4% from the same month a year ago. Photo: Ramesh Pathania/MintPremium
Maruti Suzuki India Ltd, India’s largest car maker by sales, sold 103,719 units in the domestic market in March, up 1.4% from the same month a year ago. Photo: Ramesh Pathania/Mint

New Delhi: The launch of new models and fiscal year-end demand spurred auto sales in March, with four of India’s top five auto makers on Wednesday reporting larger dispatches to dealers.

The sole exception was utility-vehicle maker Mahindra and Mahindra Ltd, which reported a 10% sales dip from a year ago and was overtaken by Honda Cars India Ltd, at least temporarily, as India’s third largest car maker by sales.

Maruti Suzuki India Ltd, India’s largest car maker by sales, sold 103,719 units in the domestic market in March, up 1.4% from the same month a year ago. Sales were boosted by its entry-level models, including the Wagon R and Alto, indicating that the return of first-time buyers is gaining momentum.

Their contribution to the company’s total sales rose to 44% in the final month of the fiscal year, from 37% at the start of the year, a company spokesperson said. This helped the auto maker sell a record 1,292,415 units in India in the year—up 11.9% from the previous year.

“March is good because of year-end. A lot of corporates and businesses buy during this time," said Joseph George, an analyst at securities house IIFL Ltd. He added that in March, retail sales to customers are generally higher than wholesale dispatches to dealers, which allows inventories to fall.

“The retail sales growth has weakened over the last two to three months. This is reflecting in wholesale dispatches as well," he said, referring to Maruti’s sales growth, which was weaker than what had been seen in recent months.

Industry executives and analysts remain cautious about prospects in the new fiscal year, given that unseasonal rains and resultant damage to crops may dampen demand in rural areas.

“The 2015 outlook seems challenging as currently there is low traction in the market with weak delivery on macroeconomic parameters and on low customer sentiments," said Rakesh Srivastava, senior vice-president, sales and marketing, Hyundai Motor India Ltd.

In March, Hyundai Motor dispatched a record 39,525 units to its dealers, up 12% from a year ago, led by new models such as the i20 Elite.

The current strong run for auto companies—helped by the softening of fuel prices, lower interest rates and lower inflation, among other factors—may not last long, said Ajay Srinivasan, director at Crisil Research.

Cumulatively, petrol prices had been cut by 17.11 per litre in 10 reductions since August and diesel by 12.96 a litre since the fuel’s price was deregulated in October, PTI reported on 1 April.

A 50 basis point cut in interest rates by the Reserve Bank of India this year has also helped sentiment. One basis point is one-hundredth of a percentage point.

“Even as we expect fiscal 2015-16 to be better than the last, a lot will depend on the monsoon," said Srinivasan.

Crisil estimates passenger vehicle sales to advance 5-6% in the current fiscal, compared with 3-5% last year. Besides normal rainfall, the projections also take into account a salary increase of 10-11%, against 9-10% last year, he said.

Maruti plans to reach as many as 150,000 villages in the current fiscal year, 25,000 more than it did last year, to offset any possible decline in rural demand, the company’s spokesperson said. Rural sales account for 35% of domestic sales by volume at Maruti.

Sales at utility-vehicle market leader Mahindra and Mahindra continued to slide. The maker of the Scorpio and XUV 5OO models sold 21,030 passenger vehicles during the month, down 10% from a year ago.

Pravin Shah, chief executive at Mahindra and Mahindra, attributed the slide to its absence in the compact sport utility vehicle (SUV) market.

Shah is hopeful of a pickup in sales after the firm launches two new compact SUV models and comes out with refreshed versions and newer variants of existing models in the current year.

Honda Cars raced past Mahindra to become the third largest passenger-vehicle maker during the month. The local arm of the Japanese car maker sold a record 22,696 units, up 23% from a year ago.

Sales of passenger vehicles at Tata Motors Ltd, led by the Zest and Bolt models, rose 19% to 15,039 units in March over the same month last year. In the absence of new models, its utility vehicle sales declined 28% to 2,062 units.

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Published: 02 Apr 2015, 12:16 AM IST
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