Commercial vehicle, car sales rise in November4 min read . Updated: 10 Dec 2014, 12:30 AM IST
Commercial vehicle sales grew 9.05%, led by40.14%growthin bus, truck sales; car sales up after two-month decline
New Delhi: Commercial vehicle sales in India grew 9.05% in November, led by a 40.14% growth in sales of trucks and buses, and although fewer smaller commercial vehicles were sold, the figures reflect a nascent economic recovery with hopes of a sharper turnaround next year.
Car sales, too, grew in the month after declining the previous two months, reducing, but not entirely removing, the chances of a second successive fall in sales in the financial year to 31 March.
Companies sold 9.52% more cars in November as compared with the year-ago period.
In the eight months to 30 November, car sales have increased 3.82% over the same period last year.
To be sure, total commercial vehicle sales declined 7.27% in the same period but this was largely because of a sharp dip in sales of smaller commercial vehicles used for more local movement of goods. Sales of medium and heavy commercial vehicles, a far better indicator of economic growth, rose by 5.30%.
Industry lobby Society of Indian Automobile Manufacturers, or Siam, which furnishes monthly data, attributed the growth in passenger car sales to discounts, lower fuel costs and excise duty relief.
“Last month’s performance gives us confidence that we should be growing, and ending the fiscal at lower single digits… less than 5%," said Sugato Sen, deputy director general, Siam.
Sales of all passenger vehicles (cars, utility vehicles and vans) grew 5.42% to 212,438 units during the month and 2.68% in the eight months to 30 November.
Sen said it is the decline of motorcycle sales that is worrisome. “Motorcycle sales are reflecting weak rural demand, which is not good for passenger vehicles either." Sen said.
Motorcycle sales declined 3% in November. They have 6.58% in the eight months to 30 November.
However, scooters helped sales of all two-wheelers increase 4.89% in the month and 11.84% in the eight-month period.
Mint reported on 25 November that lower food prices, a patchy monsoon and lower rural wages are taking their toll on demand for consumer durables in rural India.
Sales of tractors, a barometer of market sentiment in rural India, declined by 12% to 77,983 units in October over the previous year, according to Icra Research, the research arm of the rating agency. It has downgraded the outlook for tractor volumes twice in the last six months and now expects the domestic tractor market to end the year with flat sales. Earlier this year, in June, it pared its growth outlook down to 4-6% from 8%.
Growth in the average daily wage rate for rural labourers moderated to below 10% year-on-year in June, compared with 16.3% in 2013, 17.6% in 2012 and 20.9% in 2011, according to a Nomura report released in October.
The swearing-in of a new business-friendly government in May and its decision to extend the deadline for excise duty sops from 30 June till 31 December helped car sales earlier in the year, Sen explained.
But sales could slow if the sops are not extended further or if the economic recovery isn’t sharper, and there is a possibility that car sales this year could be lower than last year.
Anil Sharma, research analyst with IHS Automotive, a sector-specific consultancy, said the November performance is on “expected lines" but does not give a clear picture of the situation.
He said due to the ambiguity over the extension of excise duty reduction, companies increased production and pushed inventory to dealers.
The actual retail demand will become clearer once December numbers come out in January, Sharma said. “Since retail vehicle sales figures are not published by auto makers and associations, we need to wait for one more reporting month before drawing any conclusions."
Sen of Siam said that he has initial reports of brisk sales in December due the uncertainty around extension of the duty cut, with people buying now to avoid paying higher prices later.
Car sales have been fluctuating this financial year. They have grown 3.82% in the past eight months over last year. Since the excise duty benefit was announced in February, they have grown six months out of 10.
Economic growth slumped to sub-5% levels for two consecutive years. In the quarter ended June, the economy grew 5.7%, the fastest in two-and-a-half years. In September, growth slowed to 5.3%.
Poor sales in the auto sector took its toll on the overall consumer durables segment, according to the Economic Survey for the year ended 31 March. “The consumer durables segment, in particular the automotive sector, in India is constrained by a limited domestic market owing to low per capita income," the government said in the survey.
Sharma of IHS said that any major “pick-up" in sales is unlikely this fiscal.
“The Reserve Bank of India (RBI) seems to be having some grip on inflation. The biggest trigger will of course be rate cuts," he added.
The central bank has kept rates high to keep inflation in control, but there are signs that it could relax its monetary policy as early as January. That would mean lower interest rates for car loans.
In November, market leader Maruti Suzuki India Ltd sold 16.97% more vehicles over the same month last year. Rival Hyundai Motor India Ltd saw sales grow 6% to 35,511 units. Sales at Honda Cars India Ltd grew at 63.56% to 15,261 units.