Passenger vehicle sales see marginal decline in December despite a lower base
2 min read 11 Jan 2020, 12:37 AM ISTManufacturers also reduced production to trim inventory of BS IV emission norm compliant vehiclesAutomobile manufacturers in India consider factory dispatches as actual sales
PremiumIndian passenger vehicle sales dipped in December despite a low base in the year-ago month, indicating that the sector’s woes are far from over amid the current economic slowdown.
Factory despatches of passenger vehicles decreased by 1.24% year-on-year to 235,786 units due to an 8.4% decline in passenger car sales to 142,126 units, according to data released by the Society of Indian Automobile Manufacturers (SIAM).
Manufacturers cut production because of subdued retail demand, as well as to trim their inventory of BS-IV-compliant variants, ahead of the introduction of the more stringent BS-VI emission norms from 1 April. Routine maintenance shutdowns, including by market leader Maruti Suzuki India Ltd, also contributed to lower sales.
Amid the gloom, sales of utility vehicles stood out, recording a 30% year-on-year growth to 85,252 units, helped by product launches by Hyundai Motor India Ltd, Mahindra and Mahindra Ltd, Renault India Pvt. Ltd, MG Motor India and Kia Motors.
Automobile manufacturers in India consider factory dispatches as actual sales.
According to Rajan Wadhera, president, Siam, the transition to BS-VI emission have hurt sales, as consumers are still confused over compliance. From April onwards, companies will have to stop manufacturing BS-IV vehicles.
“The growth in the utility vehicle segment is driven by new launches and it will remain so," Wadehra said. “We have seen growth only when there is a discount of 8-10% on offer."
He said the sector is likely to emerge on a more sustained growth path “only when the GDP (gross domestic product) grows by 6-7%."
Despite the robust growth in the utility vehicle segment, the overall situation remains grim as total wholesales across categories fell 13% year-on-year in November to about 1,405,776 million units.
The Indian economy has been in the midst of an economic slowdown for the last six quarters, notching growth of just 4.5% in the September quarter. Consequently, the Reserve Bank of India cut its FY20 growth forecast to 5% from 6.1%. Electricity generation fell to a five-year low between January and November, indicating a broader contraction in factory output.
Advance estimates suggest that the Indian economy will grow by just 5% during the fiscal year, as opposed to 6.8% in FY19.
As a result of the sharp drop in economic activity and increased freight-carrying capacity of trucks, dispatches of medium and heavy commercial vehicles decreased by 31.7% year-on-year to 21,388 units. Sales of light commercial vehicles increased by 1.2% to 45,234 units. Overall, commercial vehicle sales declined by 12.3% to 66,622 units during the month.
Even heavy vehicle manufacturers have been reducing wholesales to reduce inventory at dealerships before the transition to BS-VI emission norms.
“The GDP numbers have not been very good for the nation…Sales of heavy commercial vehicles are linked to the economy," Wadehra said. A 25% increase in truck’s freight-carrying capacity since this fiscal year have also reduced the need to buy new vehicles, he added.
Subdued consumer sentiment in both rural and urban markets has led to 16.6% decline in sales of two wheelers to 1,050,038 units. Scooter sales dropped 24.5% to 306,550 units, while motorcycles fell 12% to 697,819 units.
