Retail car sales up 3.5% in December despite note ban

Auto sales in top gear

 

More people bought cars last month as compared to a year before, despite the low consumption sentiment after currency demonetisation. Wholesale shipment of passenger vehicles (by companies to dealers) fell 1.3%. 

In contrast, retail sales are estimated to have improved by a little over three%. Which shows the companies were able to bring buyers to showrooms despite demonetisation, with offers of price hikes and steep discounts.

R C Bhargava, chairman at Maruti Suzuki, the country’s biggest in car sales, said their practice was to keep wholesale supply lower in December, so that inventory did not pile up at dealers. “Due to the change in the model year after December, cars left with dealers have to be sold with incentives,” he explained.

Maruti has 47% of the domestic passenger vehicle market; it sold about 106,000 vehicles to dealers last month. However, Bhargava said, retail sales was much higher at 183,000 vehicles at the company’s dealerships, showing growth of 3% more over December 2015. The growth came even as its wholesales dipped over 4%. Many companies, including Maruti, also went for a maintenance shutdown of five-six days last month.  

Usually, Maruti Suzuki’s inventory across its dealerships is a 100,000 vehicles at the end of any month. However, it was only 34,000 vehicles at the end of December 2016. Bhargava said the industry is also estimated to have seen an increase of 3.5% in retail sales last month. “There is no published data but this is what we have been given to understand”, he added. 

Most car makers have increased car prices by 2-3% from January. But dealers are still sitting on some unsold cars manufactured last year. 

These continue to be sold on discounts while there are no discounts on car manufactured this month. Jnaneswar Sen, senior vice-president (sales & marketing) at Honda Cars India said the company’s retail sales in December was ‘far higher’ to wholesale where it posted a decline of 18%. 

Second biggest car maker Hyundai also posted a four% decline in wholesale dispatches last month. Its retail sales, however, are estimated to have shown growth. 

Bhargava pointed out that wholesales of passenger vehicles in January will be much higher that December as dealers will start building inventory once again. 

This will help the industry improve the growth rate of 8.59% in wholesale dispatches seen during April-December period of the current financial year. 

Industry body Society of Indian Automobile Manufacturers (Siam) had projected sales of passenger vehicles to grow at a double-digit rate in FY17. 

However, the growth momentum received a setback post demonetisation.