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A file photo of a Maruti Suzuki showroom. The car market leader posted flat sales in the domestic market in October. Photo: Pradeep Gaur/Mint
A file photo of a Maruti Suzuki showroom. The car market leader posted flat sales in the domestic market in October. Photo: Pradeep Gaur/Mint

Festivals fail to add sparkle to October auto sales

Deferred purchases brought on by high fuel prices, slowing economy extend lacklustre demand of previous months

Mumbai: The festive season failed to light up auto sales in October, as deferred purchases brought on by high fuel prices and a slowing economy extended the lacklustre demand of previous months, according to monthly sales data released by auto companies on Friday.

Buyers resisted the lure of discounts and freebies offered by car makers through the series of festivals that kicked off with Ganesh Chaturthi in September, followed by Navratri and Dussehra in October, and Diwali in November.

With sales grinding down for a prolonged spell, auto makers had their hopes pinned on the festive season, which typically boosts consumer sentiment.

But with only Christmas left to go, sales remained either flat or have declined for most mass-volume firms, while driving numbers for those with new models and a low sales base.

Car market leader Maruti Suzuki India Ltd posted flat sales in the domestic market in October. The local arm of Japanese car maker Suzuki Motor Co. sold 96,062 units in October, only marginally more than a year ago when it despatched 96,002 units. The company’s sales declined in most of the segments, including mini-cars, compact cars and mid-size sedans.

Analysts had warned that consumer sentiment was unlikely to improve, given the absence of any signs of economic recovery. Asia’s third largest economy expanded 5% in the year that ended in March 2013—the slowest in a decade. Recovery continues to elude, with growth further slowing to 4.4% in the June quarter.

The mood at car dealerships reflected the sombre mood.

“Navaratri was dull as competition in the form of Grand i10, Ecosport has increased in an already-tepid market. We are not anticipating much for Diwali either," said a Chennai-based Maruti Suzuki dealer who didn’t want to be identified. According to him, discounts have increased to 15,000-30,000 from 10,000-25,000 last year.

Hyundai Motor India Ltd recently launched the Grand i10, a variant of the compact car i10, and Ford Motor India Pvt. Ltd introduced the Ecosport, a compact sport utility vehicle.

“This has by far been the dullest festive season for us in a decade," said a Mumbai-based Tata Motors Ltd dealer, who also refused to be identified.

Mahindra and Mahindra Ltd (M&M), India’s largest utility vehicle (UV) maker, too, saw dismal sales in October. Overall sales for the maker of the Bolero, Scorpio and XUV5OO models were dragged down by passenger vehicles, which declined 14% to 22,924 units against 26,932 units a year ago.

Pravin Shah, chief executive (automotive division) at M&M, said that in spite of new launches, the auto sector had witnessed a nearly 5% decline during the first half of fiscal 2013-14. And the latest hike in the policy rate by the Reserve Bank of India may prove to be a further dampener for potential customers.

“The auto industry continues to look forward to immediate support in terms of a stimulus package to perk it up as well as bring back the growth momentum," he added.

Passenger vehicle sales at Tata Motors continued to slide, declining to 14,133 units from 21,119 units a year ago. Sales at Hyundai also remained flat at 36,002 units against 35,778 units last year.

The festivals, however, did bring a measure of cheer to some.

Sales at Toyota Kirloskar Motor Pvt. Ltd increased 7% to 13,162 units. Driven by the Amaze sedan, sales at Honda Cars India Ltd rose 39% to 11,214 units. Albeit on a small base, sales at General Motors India Pvt. Ltd went up 14% to 7,715 units over the last year. Ford India sold 9,163 units, up 21% over the last year.

With the majority of festivals coming to an end, Mitul Shah, an analyst at brokerage Karvy Stock Broking Ltd, expects the next two quarters to be muted for most firms. According to Shah, a recovery will be seen closer to the general election next year and Mahindra will benefit the most. Typically, elections lift demand for UVs.

However, two-wheelers were in demand in the festive season. Helped by sustained rural demand after a good monsoon, India’s largest two-wheeler maker Hero MotoCorp Ltd posted record monthly sales in October.

It sold 625,000 units, an increase of 18.7% over the same month last year. Anil Dua, senior vice-president (marketing and sales), said: “...our retail sales—which is a real barometer of customer response—has also set a new record. This sales momentum has been helped by our star brands Splendor and Passion and also by the new products."

A recently introduced five-year warranty also helped sales, Dua said. “With Dhanteras and Diwali in November, we are prepared to maintain this retail momentum going forward," he added.

Similarly, Honda Motorcycle and Scooter India Pvt. Ltd, India’s second largest two-wheeler maker, saw its sales jump to a record 50% to 375,741 units over a year ago. Sales at TVS Motor Co. Ltd rose 2% to 170,273 units over a year ago.

In a 1 November note, rating agency ICRA Ltd said that as in the past, the onset of the festive season has brought about a sequential growth in volumes in the second quarter of 2013-14, but the quantum of quarter-on-quarter growth at 1% remained much lower than the historical average of 6-7%, indicative of the weakness in consumer sentiment.

The auto index of BSE rose 1.29% to 12,230.53 points on Friday, outpacing the bourse’s benchmark equity index, the Sensex, which closed at 21,196.81 points, up 0.15%.

Arundhati Ramanathan in Chennai and Amrit Raj in New Delhi contributed to this story.

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