Auto sales rise 12% in April on recovery in rural areas
Recovery in semi-urban and rural markets, and stable urban demand boosted by the Akshaya Tritiya festival help volumes exceed analysts’ forecast
Mumbai: India’s top car makers reported an 11.99% growth in sales in April, as sales recovered in semi-urban and rural markets, besides stable urban demand boosted by the auspicious Akshaya Tritiya festival.
The top five passenger car makers—Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Mahindra and Mahindra Ltd, Tata Motors Ltd, and Toyota Kirloskar Motor Pvt. Ltd—sold 246,482 units during the month, up from 220,083 units a year ago.
Auto makers in India count dispatches to dealerships as car sales.
Volume growth marginally surpassed analysts’ expectations as demand from non-metros rebounded strongly after the low of demonetization, in addition to stable urban demand after the disruption caused by the goods and service tax (GST), an analyst said.
“There is a broader recovery happening in rural areas, while urban demand has largely remained stable. The broader consumer segment is doing very well, also evident from the FMCG (fast moving consumer goods) segment,” said Subrata Ray, senior vice-president and group head (corporate sector ratings) at ratings company Icra Ltd.
Signs of a broader economic recovery were visible in the 7.2% GDP growth for the three months ended December, as compared to sub-7% growth since demonetization in November 2016.
The Reserve Bank of India (RBI) expects India’s economic growth to strengthen to 7.4% in the current fiscal, from 6.6% in 2017-18.
The prediction of a normal monsoon season by the India Meteorological Department (IMD) in mid-April also helps.
Increasing buyer confidence and stability in business circles have also improved over the past year, according to Anil Sharma, associate director at MarketsandMarkets, a market research firm.
“There is greater confidence in the economy because of structural reforms (such as the GST) since the uncertainty during their teething days has now vapoured (disappeared),” Sharma added.
However, if one looks at company-wise data, car sales growth has been led only by a handful of carmakers as compared to others.
Maruti Suzuki, the country’s largest passenger car maker, reported a 13.37% jump in sales from a year earlier to 147,548 units.
The compact car segment, comprising the Baleno, Swift and Ignis hatchbacks, led the way with a 31.85% growth over a year ago to 83,834 units. While the premium hatchback Baleno continues to do well, volumes were driven by the new Swift, which was unveiled during the Auto Expo in February.
Sales of old workhorses Alto and WagonR declined by 2.84% to 37,794 units, reversing the one-off increase in March, while the Ciaz sedan also dragged volumes with a 27.16% decline to 5,116 units.
Tata Motors sold 17,235 units, a 34.37% jump from a year earlier, on the back of continued demand for the Tiago hatchback and Nexon compact SUV, besides other new launches, according to Mayank Pareek, president of the passenger vehicles division at the Tata Group flagship.
Hyundai clocked 46,735 units in sales, a 4.42% rise over the year-ago, on the back of models such as the Grand i10 and Elite i20 hatchbacks, Verna sedan and Creta compact SUV (sport utility vehicle), according to Rakesh Srivastava, director of sales and marketing at the local subsidiary of the South Korean carmaker.
Homegrown auto conglomerate Mahindra and Mahindra Ltd posted a 13.08% jump in sales to 21,927 units. Rajan Wadhera, president of the automotive division at M&M, is “confident of this positive momentum continuing in Q1FY19”.
Going forward, Icra has forecast a 9-10% sales growth for passenger vehicles, Ray said, adding increased government spending on road and infrastructure building will be positive for auto sales during the fiscal.
R.C. Bhargava, chairman of Maruti Suzuki, expects the carmaker to clock double-digit growth this fiscal on the back of a broader uptick in the economy and a normal monsoon, while conceding that rising crude prices are likely to weigh in on consumer sentiment.
However, factors such as rising Brent crude prices—which are currently hovering around $75 a barrel, up 12% from end December 2017 levels—and a sharp rise in raw material prices over a year-ago, are likely to play spoilsport.