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The domestic passenger vehicle industry could clinch double-digit volume growth in FY17, unfazed by the flat performance in the first two months since demonetisation. 

A significant push has come from the January performance when the industry came back stronger to post 16 per cent growth. Seven of the top ten companies reported double-digit growth in January.

Led by the top two players, Maruti Suzuki and Hyundai, the passenger vehicle (cars, utility vehicles and vans) industry sold about 260,000 units during January to dealers. This translates into year-on-year growth of 16 per cent. This strong volume growth comes after two weak months.

In November last year, the government withdrew two high-denomination currency notes (Rs 500 and Rs 1,000) from circulation with the stated objective of curbing black money. This caused panic among the masses and kept a large number of buyers away from the market, impacting sales of cars, two-wheelers and other consumer durables severely. The passenger vehicle industry sold 468,803 units in the domestic market during November-December, almost flat compared to the corresponding period of the previous year.

These two weak months also pulled down the cumulative growth of the industry in the year. Against strong growth of 11 per cent in the April-October period of FY17, growth weakened to 8.59 per cent in the nine months ended December 2016. However, with a strong recovery in January, the growth in April-January has improved to about 9.3 per cent. This has brought optimism back to the sector.

Amit Kaushik, managing director for India at consultancy firm Urban Science, said the growth momentum was expected to continue due to a consumer-friendly budget and incentives offered by car makers. Industry body Siam maintains a double-digit growth forecast for the year. If it happens, the industry will post double-digit growth after a gap of five years (FY11 saw 28 per cent growth). FY16 growth was 7.24 per cent.

Rakesh Srivastava, senior vice-president (sales & marketing) at Hyundai, said the year 2017 looks promising with the entire industry looking forward to positive growth. Hyundai, the second biggest player, reported volume growth of 10.5 per cent in January by selling 42,017 units.

Market leader Maruti Suzuki, which commands a 47 per cent share, posted volume growth of about 25 per cent in January when it sold 133,768 units in the domestic market. The third largest player M&M, which mostly sells utility vehicles, posted a nine per cent drop in January volumes. Pravin Shah, president and chief executive (automotive) at M&M, said, “The auto industry continues to see mixed reactions and some of the segments, including the rural market, continue to face challenging times."

Outside Maruti Suzuki and Hyundai, many other companies showed a strong recovery in January. Those that managed to post double-digit volume growth include Tata Motors, Toyota, Renault, Ford and Nissan. Other than M&M, Honda was the only company which posted a decline.