Automobile sales in May provide another glimmer of hope
Launch of new models and purchases related to the election campaign helped spark demand where sales dropped for 18 months in a row
- Motherson Sumi plans to invest Rs2,000 crore this fiscal to build new capacities
- Paytm says never shared users’ data with third-parties, government
- Four years of Modi govt: Labour reforms slow down despite policy revamp
- Job creation still a challenge after four years of Modi govt
- Oil prices slump 3% as Opec and Russia consider output boost
Mumbai: Automobile sales showed signs of recovery in May as the launch of new models and purchases related to the election campaign helped spark demand in a market where sales dropped for 18 months in a row.
Maruti Suzuki India Ltd, the country’s largest car maker by sales, reported a 16% increase in its domestic sales in May from a year earlier. The local arm of the Japanese car maker sold 90,560 units last month, up from 77,821 units a year ago, it said in a statement on Monday. Other manufacturers also reported sales increases.
To be sure, year-on-year growth in sales looks stronger because of a low base effect. In May 2013, auto sales dropped 12% as a slump in economic growth, high borrowing costs and fuel prices weakened consumer sentiment. In the year ended March, passenger vehicle sales posted the first decline in 10 years.
“Considering the steep drop in passenger car sales we saw in 2013, even marginally better sales will translate into big volume gains. Hence some uptick is not surprising,” said Deep Mukherjee, senior director at India Ratings and Research Pvt. Ltd.
Rural and election-related purchases also contributed to the increased sales, Mukherjee said.
Manufacturers are hoping that consumer sentiment and eventually automobile purchases will rebound as the new government tries to revive economic growth that slumped to 4.7% in the year ended 31 March—the second year in a row that it had fallen below 5%.
The sales increase at Maruti was led by a 53% increase in sales posted by the compact car segment, which includes the Swift, Celerio, Ritz and Estilo. Maruti launched Celerio, India’s first car with automated manual transmission technology, in February and currently has a waiting period of four to six months for some variants.
With the exception of the mini- and mid-size segments, the company’s sales across all categories including utility vehicles, vans and the super-compact segment expanded during the month.
New models also drove sales at Hyundai Motor India Ltd (HMIL), the country’s second largest car maker by sales, which reported an increase of 12.8% to 36,805 units.
“Sales, led by the new models, are in line with this year’s objective to grow in market share and volume,” said Rakesh Srivastava, senior vice-president, sales and marketing at HMIL, in a statement, adding that the success of the Xcent, i10 Grand and Santa Fe had increased sales by volume.
For Toyota Kirloskar Motor Pvt. Ltd, it was a combination of a return to normality in production, which had been hit in March and April owing to labour issues, along with new model launches that did the trick. Toyota sold 11,833 units in the domestic market in May, an increase of 18% over the year-ago period.
N. Raja, director and senior vice-president, sales and marketing, also attributed the increase to the new launches including the Etios Cross and Altis. Since their introduction last month, Toyota has sold 555 and 548 units of the models, respectively.
At Honda Cars India Ltd, sales increased 18% to 13,362 units, led by an increase in sales of the new City and the Amaze, the company’s compact sedan.
Passenger vehicles sales for Tata Motors continued to trend lower, declining 17% to 9,230 units over the last year.
Mahindra and Mahindra, the market leader in utility vehicles and tractors, also saw a decline in passenger vehicle sales. In the absence of any new models, passenger vehicle sales at the Mumbai-based vehicle maker dropped 19% to 18,085 units from a year ago. Sales at the maker of the Scorpio and the Bolero models have been dwindling since April last year.
“Auto sales continue to remain subdued for many players on the back of yet another challenging month for the industry. Post the electoral mandate, we expect to see improved sentiments resulting in a better economic situation which we hope will lead to a gradual increase in demand,” said Pravin Shah, chief executive of the automotive division at the firm.
Some green shoots may be visible in the May sales data, but it’s too early to say a recovery has kicked in, analysts said.
“One cannot say recovery is imminent just as yet,” said Ajay Shethiya, an analyst at Centrum Broking Pvt Ltd.
The first two months of the fiscal year have seen only nominal growth of 3% in sales from the year-ago period, he said, adding that June sales may show strength as buyers may advance purchases, fearing a duty hike in the national budget in July.
Among two-wheeler makers, market leader Hero MotoCorp. Ltd, reported sales at an all time high. Riding on robust sales of newly launched vehicles, the company sold a record 602,481 units, an increase of 8% from a year ago.
Anil Dua, senior vice-president, marketing and sales, ascribed the increase to a seasonal surge in sales as also to the recent new launches.
“Going forward, with positive sentiment building up around the political and economic environment, we hope to sustain the current momentum,” he said.
Honda Motorcycle and Scooter India Pvt. Ltd, the second largest in the segment, also reported robust expansion selling 355,726 units, up 55 %.
Sales at Bajaj Auto Ltd, India’s largest exporter of motorcycles and three-wheelers, rose 4% to 351,436 units (including exports) compared with a year ago. Exports, which expanded 40% to 156,179 units, drove volumes.
Bajaj Auto’s sales volume in both domestic and exports market are likely to expand in the coming months. While new models will push sales in the local market, lifting of an export ban by Egypt—the company’s second biggest export market for three wheelers after Sri Lanka—will prop up overall sales.
The BSE Auto Index rose 1.43% on Monday while the BSE Sensex gained 1.93%. In May, the BSE Auto Index rose 8.39%, tracking an 8.03% gain on the Sensex.
Editor's Picks »
- Banking on natural farming methods
- Narendra Modi inaugurates Rs11,000 crore Eastern Peripheral Expressway
- EPFO cuts administrative charges to 0.5%, firms to save together Rs900 crore annually
- ED to seek immediate confiscation of Nirav Modi’s Rs7,000 crore assets under fugitive ordinance
- Finance ministry in talks with investors to set up strategic investment fund under NIIF
- Motherson Sumi continues to face margin pressure in foreign markets
- What the Warren Buffett indicator tells us about market valuations today
- Jet Airways lands with a thud in Q4 as fuel costs increase
- IBC amendments: Some dilutions, and a lot more speed
- Patanjali’s gambit is paying off in toothpaste wars