Car sales remain flat in Nov as weak festive season ends

Mumbai: Passenger car sales remained almost flat in November as companies adjusted their inventory after a weak festive season. Subdued consumer sentiment, volatile fuel prices and inflation are likely to remain demand dampeners but new model launches in the coming months are expected to help drive sales, car makers said on Saturday. The top five carmakers—Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Tata Motors Ltd, Mahindra and Mahindra Ltd and Honda Cars India Ltd—sold a combined 219,722 vehicles last month, compared with 219,746 units a year earlier.

Automakers consider factory dispatches to dealerships as sales.

Car sales have stayed weak since July due to various factors such as a high base, floods in Kerala, unfavourable macroeconomic factors, as well as regulatory changes and high fuel prices, which increased the cost of ownership.

In the 42-day festive period till Diwali in early November, retail sales of passenger vehicles fell 14%, said the Federation of Automobile Dealers Association, attributing it mainly to the liquidity crunch faced by financiers.

The festive season which peaks with Diwali is crucial for auto makers as buyers consider it auspicious to make big-ticket purchases such as cars, gold and real estate. About 30% of annual car sales happen during this period.

The negative sentiment was influenced by a rise in financing and insurance costs, said Jinesh Gandhi of Motilal Oswal Securities Ltd in a note on Sunday. He said however that new launches in November (Ertiga and Marazzo multi-utility vehicles) had some positive impact on demand.

Maruti Suzuki, India’s largest carmaker, posted a 0.68% drop in domestic car sales last month to 129,837 units, from 130,732 units a year earlier. Sales of Maruti have fallen in four of the past five months. The figures exclude sales of Omni and Eeco vans and light commercial vehicle Super Carry.

The local subsidiary of South Korea’s Hyundai Motor Co. matched Maruti’s performance, with a 0.68% fall in local sales in November to 43,709 units. Robust sales of the new Santro small car failed to offset weak demand for other models of Hyundai.

Hyundai sold more than 8,800 Santro cars in November and has received more than 40,000 bookings since its October launch, said Vikas Jain, the company’s national sales head. Mahindra & Mahindra Ltd reported a marginal rise in local passenger vehicle sales in November to 16,188 units, compared with 16,030 units a year ago.

Analysts and industry executives expect car sales in the current fiscal year to grow 7-8%, a downward revision from a double-digit growth estimate at the beginning of the year.

Rajan Wadhera, president of Mahindra’s automotive sector said “adverse” macroeconomic conditions impacted growth projections for this fiscal year.

Going forward, Wadhera hopes that a fall in fuel prices and improving liquidity will drive demand for passenger vehicles, in addition to new launches such as the Marazzo multi-purpose vehicle, Alturas G4 premium SUV and a S201 compact SUV for Mahindra.