Sale of cars, sport utility vehicles and minivans grew 2.7% in the year ended 31 March to more than 3.37 million vehicles, shows data issued by Society of Indian Automobile Manufacturers (Siam) on Monday. It was the worst performance since FY14 when sales fell 6%.
Vehicle sales in India are counted as wholesales, or factory dispatches.
Considering the continued pressure on sales and prevailing market uncertainty, the industry lobby group has projected a modest 3-5% rise in passenger vehicle sales in FY20. Commercial vehicle sales are forecast to do better, with a 10-12% growth in anticipation of strong advance purchases by fleet owners towards the end of FY20 before the implementation of stricter Bharat Stage-VI emission norms, which will make vehicles costlier. Two-wheeler sales are predicted to grow 5-7%.
Sales were expected to rebound after the conclusion of the general elections, said Siam president Rajan Wadhera. A recovery in demand would, however, be contingent upon factors such as abundant monsoon rain and improvement in credit availability, he said.
“Demand for vehicles have been better in rural compared to urban markets and many original equipment manufacturers had cut production in March and reduced the billing of vehicles. Also, in the urban areas, shared mobility like cab services have resulted in the slowdown in demand," he said.
Meanwhile, with urban demand staying subdued, scooter sales fell 0.27% to 6.7 million units in the last fiscal. This was the first drop in the scooter segment since a 1.45% decline in FY06.
Motorcycles fared better, posting a 7.8% increase to nearly 13.6 million units on the back of better demand in rural and semi-urban markets.
In addition to higher petrol prices and increase in product prices by manufacturers, a rise in the cost of third-party insurance prompted many to defer their purchases.
“The general sentiment in the market was down, especially in urban areas, after the increase in insurance cost, which led to an increase of 10% in the total cost of the vehicle," said Sugato Sen, additional director general of Siam. “The dip in demand in the urban areas is also reflected in the decline in sales of scooters and passenger vehicles. Rural and semi-urban markets are still performing better than the urban markets."
Commercial vehicle sales, an indicator of economic activity, climbed 17.55% in the last fiscal to touch the one million sales milestone for the first time.
Medium and heavy commercial vehicle sales grew 15% to 390,740 units, while light commercial vehicle sales increased 19% to 616,579 units.
Robust growth in the commercial vehicle segment in the first half of the fiscal helped to partly offset demand weakness in the second half due to a squeeze in financing options from non-banking financial companies (NBFCs) following the crisis at Infrastructure Leasing and Financial Services, as well as revised axle norms that allowed trucks to carry more freight.
“Adequate finance for vehicle is still not available and is still taking a lot of time," Wadhera said. “Finance options that were available in two days, now take 10 days. NBFCs are still very cautious while lending."
On the retail side, passenger vehicle registrations rose by 3.68% to 3.2 million units, while commercial vehicle registrations jumped 22% to 97,8811 units in FY19, according to the vehicle registration data available on the government’s Vahan website.
Sales of two-wheelers increased by 9.6% to 1.65 million units.
“In FY19, various factors led to a rise in overall cost of ownership, including volatile fuel cost, higher interest rates as well as increased upfront insurance cost. It dampened consumer sentiments, especially in the passenger vehicle and two-wheeler segments. With stabilization of fuel prices and a further rise in interest costs unlikely, Ind-Ra expects consumer sentiments to improve modestly in FY20, especially in the four- and two-wheeler segments," said Richa Bulani, senior analyst at India Ratings and Research Pvt. Ltd.
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!