Car sales hit the slow lane, growth slumps to single digit


The party in motown is showing signs of weariness with sales growth in May slumping to single digits after many quarters. This has prompted the industry body for automobiles to cut sales target for the year.

Data show that high interest rates and a series of fuel price increases have started taking a toll on demand for new cars and sports utility vehicles.

Twelve out of 18 passenger vehicle makers, accounting for more than 90 per cent sales, collectively posted an increase of only eight per cent compared to 14 per cent in April, as buyers preferred to hold purchases, leading to inventory pile-up at showrooms.

The companies sold 190,838 units in May as compared to 176,432 units in the same month of 2010.

The Society of Indian Automobile Manufacturers (SIAM) has revised its yearly growth forecast for passenger cars from 16-18 per cent to 14-16 per cent. This, SIAM officials say, is subject to further change if the situation does not improve.

Car makers agree. Market leader Maruti Suzuki said the target might not be achievable. The sales have risen 11 per cent in the last two months. For the target to be met, the growth has to be over 18 per cent in the remaining months of the year. This, say officials, is difficult.

Mayank Pareek, managing executive officer (marketing and sales), Maruti Suzuki India, said, “The fact is that there is a slowdown in the market. The wholesale numbers are looking fine, but the scene at the retail level is much worse. Consumers walk away when it comes to actually booking the vehicle.”

The wholesale figure shows the numbers of vehicles that companies dispatch to dealers while the retail figure is the number of vehicles that are actually bought.

Maruti Suzuki sold 93,519 units in the domestic market in May, a growth rate of 4 per cent over May 2010.

Tata Motors, India’s third-largest car maker, also failed to arrest the fall in sales, which stood at 19,401 units, 9 per cent lower than the 21,324 units it sold in May last year. Both Indica and Indigo range of models suffered from low demand. The company sold 6,515 units of Nano.

The sentiment is so bearish that even those which have bucked the downtrend are wary. For example, Hyundai Motor (HMIL) has posted better numbers, primarily on the back of the new version of Verna, whose 4,800 units were sold. The country’s second-largest car maker reported a 15 per cent increase in sales at 31,123 units as against 27,151 units in May 2010.

However, Arvind Saxena, director (Marketing and Sales), HMIL said, “The market has slowed considerably after the first quarter of the year because of increasing interest rates and fuel prices, among other factors. HMIL, riding the success of its recently-launched Fluidic Verna, which has received over 12,000 bookings, has maintained positive growth.”

Or, consider the country’s biggest sports utility vehicle manufacturer, Mahindra & Mahindra (M&M). Even though M&M posted 20 per cent growth, it lowered its sales forecast.

Pawan Goenka, president (automotive sectors), M&M, said, “Looking at the demand in the last two months, we have lowered our growth forecast for the year for cars to 14-16 per cent. This is as of now and may change in the coming months if the situation does not change. We are keeping a close watch on the retail situation”.