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Car sales plummet: Sign of a slowdown?

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Passenger vehicle sales in the domestic market recorded their sharpest drop in over three years last month. Twelve of the 19 automobile manufacturers posted a sales decline of 10.56 per cent in July, at 173,615 units from 194,122 units during the same period last year. This was the first time that sales went into the negative zone in the last 27 months.

Data available with the Society of Indian Automobile Manufacturers showed that in May 2009, passenger vehicles sales had declined to 141,145 units from 141,940 units sold in May 2008. However, the decline then had been marginal, at 0.56 per cent.

 

IN REVERSE GEAR

Company

Jul ‘10

Jul ‘11

% chg

Maruti Suzuki

90,114

66,504

-26.20

Hyundai

28,811

25,642

-11.00

Tata Motors

27,865

17,192

-38.00

M&M

12,825

17,312

34.99

Toyota

6,834

13,592

99.00

Volkswagen

2,597

6,529

151.00

Fiat

2,301

1,102

-108.80

General Motors

7,124

9,508

34.00

Nissan

1,005

1,593

58.50

Ford 

8,739

7,504

-14.10

Skoda 

1,222

2,412

98.00

Honda

4,685

4,725

1.00

Total

194,122

173,615

-10.56

Source: Companies

The share prices of auto companies rose on bargain hunting after the July vehicle sales data. Mahindra & Mahindra rose 1.71 per cent to Rs 730. Tata Motors was up 1.36 per cent at Rs 960. Hero Honda gained 0.6 per cent at Rs 1,798 and Maruti Suzuki was up 0.07 per cent at Rs 1,208 on the Bombay Stock Exchange. The BSE auto index was up 0.79 per cent while the Sensex was up 0.64 per cent.

“In India, 70 per cent of the vehicles are purchased by availing loans. The Reserve Bank has hiked lending rates 11 times since last year, which has translated into a hike of three percentage points on auto loans. Some banks are not willing to extend loans due to the tightening of credit availability in the economy. This, coupled with the uncertainty over the pricing of fuel, has affected consumer sentiment. People are deferring purchases. Since the financial crisis in 2008-09, this is the worst phase the industry has gone through,” said Abdul Majeed, leader, automotive practice, PricewaterhouseCoopers.

Industry sales numbers were dragged down as three leading manufacturers Maruti Suzuki India Limited (MSIL), Hyundai Motor India Limited (HMIL) and Tata Motors saw sales drop 26 per cent, 11 per cent and 38 per cent, respectively. MSIL, which accounts for over 42 per cent passenger vehicles sold in the domestic market, sold 66,504 units as against 90,114 units it sold in July last year.

The company’s bread and butter small car segment posted a whopping 28 per cent decline in volumes, with sales of the Alto, M800, WagonR, Swift, Ritz, A-Star and Estilo sliding to 47,127 units. “While the overall automobile market was sluggish, the company’s domestic sales numbers in July 2011 were impacted as the manufacturing of Swift Dzire was shifted from Manesar to Gurgaon,” MSIL said in a statement.

During this period, production of the sedan was temporarily affected. That resulted in 54,71 fewer units of the car sold as compared to July 2010.

MSIL also discontinued production of the old Swift in June this year. The company dispatched 348 units of Swift last month as compared to 11,828 units dispatched in the same period last year. Sales in July were impacted negatively to the tune of 17,000 units due to changes in production processes.

The country’s second largest car maker HMIL registered a 11 per cent decline in domestic sales at 25,642 units. Arvind Saxena, director (marketing and sales), HMIL, said, “The July 2011 sales for both the industry and as well as Hyundai have been negative. Customer enquiries have increased but due to the increase in fuel prices and high interest rates, the conversion rate has slowed down.”

Tata Motors fared worse, with wholesale numbers dropping 38 per cent to 17,192 units. Sales fell across the Indica, Indigo and utility vehicles’ range, with small car Nano recording the steepest drop of 64 per cent at 3,260 units. Smaller manufacturers such as Volkswagen, Skoda, Nissan and Toyota posted growth in sales last month on a lower base on the back of new car launches. Nissan saw a growth of 58.5 per cent over July 2010 at 1,593 units due to a rise in sales of small car Micra.

Toyota Kirloskar Motor (TKM) too doubled volumes due to increased offtake of the sedan Etios and hatchback Liva, which were introduced in December 2010 and June 2011 respectively. TKM sold 4,095 units of Etios and 2,551 units of Liva last month. In the export market, the response was varied. While Maruti saw a decline of 18 per cent in July, largest exporter Hyundai saw an increase in sales of 11 per cent to 24,025. That partially offset the sharp drop in its domestic sales.