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Business News/ Industry / Manufacturing/  Festivals, better sentiment light up auto sales in August
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Festivals, better sentiment light up auto sales in August

Sales at India's top three car makersMaruti Suzuki, Hyundai and Honda Motor Co.rose by double digits in the month from a year ago

Companies with new vehicle models in their product line-up benefited in August. Photo: MintPremium
Companies with new vehicle models in their product line-up benefited in August. Photo: Mint

Mumbai: Auto sales rose in August as consumers enthused by signs of an economic recovery and the introduction of new models helped sustain demand for the fourth month in a row, sparking hopes of a turnaround in an industry that posted its first annual decline in sales in 11 years in the year ended 31 March.

Sales were also helped by auto makers despatching more vehicles to dealers in anticipation of higher demand in the festive season that began last month with Ganesh Chaturthi and Raksha Bandhan, among other festivals. Indian auto makers report sales to dealers and not to end buyers.

Slower economic growth, which slumped below 5% in each of the previous two financial years, high fuel prices, and increased borrowing costs have dented demand for automobiles, which slumped for nine straight months before starting to rise in May in Asia’s third largest economy.

The first signs of an economic recovery have been visible in recent months with inflation slowing and industrial production rebounding after a new government led by Prime Minister Narendra Modi took charge in May with a pledge to boost growth and create jobs.

The recovery was confirmed by data released on Friday that showed the economy had grown 5.7% in the June quarter—the fastest pace in two-and-a-half years.

Maruti Suzuki India Ltd, the country’s largest car maker, said local sales jumped 29% from a year earlier to 98,304 units in August. The sales were led by a 53.2% increase in the collective sales of the Swift, Dzire and Celerio models to 46,759 units from 30,512 in the same month last year.

Sales rose across all segments at the local unit of Suzuki Motor Corp. Sales in the passenger vehicle segment, which includes the Ertiga among other models, rose 20%.

Sales at Hyundai Motor India Ltd, India’s second largest car manufacturer, rose 19.2% to 33,750 units compared with the year-ago period.

Positive customer response to new Hyundai models including the entry-level sedan Xcent and the Elite i20 and i10 Grand hatchbacks drove the company’s sales, said Rakesh Srivastava, senior vice-president of sales and marketing.

“We maintain a cautious optimism for a good festive season on the strength of new products, increase in demand for petrol cars and improving customer sentiment," he said.

New models such as the new City, the Amaze and the Mobilio fuelled sales at the local arm of Honda Motor Co. The company, which has displaced Mahindra and Mahindra Ltd as India’s third largest passenger vehicle maker, sold 16,758 units, up 88% from August last year.

To be sure, optimism about a turnaround in auto sales is tempered by doubts whether the demand is sustainable.

The spurt in growth seems to be more on account of a turnaround in consumer sentiment rather than hard economic data at the moment, said Kumar Kandaswami, a senior director at consulting firm Deloitte Touche Tohmatsu India Pvt. Ltd.

“There may be a tapering off of demand if the economic parameters remain weak in the coming months. If inflation goes down and if investment begins to flow into the important sectors triggering growth in disposable income, the growth in demand for cars will be sustained," he said.

The spurt in sales before the festival season will be guided by the demand drivers improving significantly.

Companies with new vehicle models in their product line-up benefited in August.

Passenger vehicle sales at Mahindra and Mahindra continued a declining streak for the 16th month in a row. Sales at India’s largest utility vehicle maker dropped 11% to 14,140 units in August from a year ago. The company’s overall sales, including trucks and buses and three-wheelers, also fell 6% to 33,145 units.

“In spite of overall sales remaining flat in August, we continue to be optimistic due to the industry’s enhanced business confidence which is reflected by the manufacturing sector showing signs of revival," said Pravin Shah, chief executive of the automotive division and international operations at Mahindra.

Sales at Toyota Kirloskar Motor India Pvt. Ltd also remained subdued with sales declining 19% to 12,384 units in August.

“We look forward to increased demand in the coming months due to the festive season," said N. Raja, director and senior vice-president, sales and marketing, at the firm.

Albeit on a low base, sales at Nissan Motor Pvt. Ltd gained 60% to 3,999 units. The local units of US auto makers, Ford India Pvt. Ltd and General Motors India Pvt. Ltd, also reported muted numbers with sales declining to 15% to 6,801 units and 36% to 4,232 units, respectively.

Two-wheeler makers kept up their strong sales run. Leading the pack was Hero MotoCorp Ltd, which sold 558,609 units in August, up 21% from a year ago. The company attributed the strong sales to new models such as the Karizma, the ZMR Xtreme, the Passion Pro TR and the Pleasure scooter.

Honda Motorcycles and Scooter India Pvt. Ltd, the second largest, also posted robust numbers. While the company’s August motorcycle sales rose 6.3% to 153,194 units from 144,039 units a year ago, scooter sales increased 47.6% to 217,866 units from 147,600 units. TVS Motor Co. Ltd, the third largest two-wheeler maker, also reported a 50% increase in sales to 190,547 units.

“The sales reflect the positive change in sentiment. We expect volume to only drive up further from here as new model launches coinciding with the festive season will boost demand," said Mitul Shah, an analyst at Karvy Stock Broking Pvt. Ltd, adding that this would also be helped by the economy gathering more steam in the months ahead.

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Published: 01 Sep 2014, 11:56 PM IST
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