The automobile industry in India has been mired in a deepening sales slowdown for more than a year (Photo: Bloomberg)
The automobile industry in India has been mired in a deepening sales slowdown for more than a year (Photo: Bloomberg)

No recovery in sight for carmakers, sales drop 6.2% in January

  • The decline came despite a 0.29% increase in sales of market leader Maruti Suzuki
  • A shift to making vehicles that are compliant with BS-VI emission norms, due from 1 April, is also leading companies to cautiously adjust their production and inventory levels at dealerships

Mumbai: Passenger vehicle sales in India fell the most in three months in January, underscoring that a prolonged slump in demand could continue as consumer sentiment remains weak in a slowing economy while automakers adjust production ahead of a transition to new emission norms.

Sales of cars, utility vehicles and vans declined 6.2% to 262,714 units in January from a year earlier, according to data issued on Monday by the Society of Indian Automobile Manufacturers (Siam). Car sales in India are counted as factory dispatches or wholesales and not retail sales. Passenger vehicle sales had fallen 1.24% in December and 0.84% in November, which followed a 0.28% rise in October.

The decline came despite a 0.29% increase in sales of market leader Maruti Suzuki India Ltd to 139,844 vehicles. The Suzuki Motor Corp. unit was ably supported by Renault SA, which posted a 34% surge to 7,805 units, while Kia Motors Corp. sold 15,000 units of its sole product, the Seltos sport utility vehicle (SUV), which was introduced in August.

The automobile industry in India has been mired in a deepening sales slowdown for more than a year. A shift to making vehicles that are compliant with Bharat Stage-VI emission norms, due from 1 April, is also leading companies to cautiously adjust their production and inventory levels at dealerships.

“Sales of vehicles continue to be stressed due to rising cost of vehicle ownership and slower growth in GDP," said Rajan Wadhera, president of Siam. “We are hopeful that the recent announcements of the government on infrastructure and rural economy would support growth of vehicle sales going forward, especially in commercial vehicle and two-wheeler segment."

Passenger car sales fell 8.1% in January to 164,793 units although utility vehicles, which largely comprises SUVs, recorded a 2.57% increase to 84,929 units. Demand for SUVs from Kia, MG Motor India Pvt. Ltd and Hyundai drove sales.

According to Emkay Research, Maruti Suzuki outperformed its rivals as it augmented dealer stocks with existing and new products.

Sales in the commercial vehicle segment, considered a leading indicator of economic growth, fell 14% in January from a year earlier to 75,289 vehicles. The weak performance is because of a 44% drop in sales of medium and heavy trucks, highlighting weak demand for transporting raw materials and finished products, as well as from the infrastructure sector. Sales of light trucks fell 1.5% during the month.

Sales of two-wheelers fell 16% year-on-year to 1.34 million units in January, according to Siam.

(Graphic: Paras Jain/Mint)
(Graphic: Paras Jain/Mint)

“The auto industry continues to be in the doldrums and the macro indicators remain unfavourable as it can be seen that the consumer confidence is going down, inflation is increasing. Then there was no stimulus for the industry in the budget in terms of reviving consumer sentiments," said Puneet Gupta, associate director at IHS Markit. “We see weak demand in 2020 despite low base of vehicle sales in 2019."

Total sales of automobiles declined 14% in January to nearly 1.74 million units.

Siam’s Wadhera, however, expressed hope that the “excellent response" to Auto Expo 2020 is an indication of a turnaround in the industry’s fortunes in the months ahead.

Automakers such as Tata Motors Ltd, Mahindra and Mahindra Ltd, Hyundai Motor India Ltd, Bajaj Auto Ltd, Honda Motorcycle and Scooter India Pvt. Ltd have already said the first two quarters of the next fiscal starting April would remain weak on expected price increases across vehicle categories on BS-VI compliant vehicles, and that they do not expect a recovery before the festive season.

Senior executives at automobile companies said recently that they expect production to remain lean in the current quarter on transition to BS-VI norms and cautious inventory build-up.

Siam executives are hopeful that recent government announcements on infrastructure and rural economy would support growth of vehicle sales, especially of commercial vehicles and two-wheelers.

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