Retail finance availability weighs on sentiments, dents January auto sales

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  The first month of the new calendar year failed to cheer auto firms as sales remained in low gear owing to subdued sentiment caused by poor availability of retail finance, shows monthly sales data released by auto companies on Friday. Seven out of every ten passenger vehicles bought in India are purchased on credit. 


Clocking a total of 256,000 units over 255,000 units in 2018, cumulative sales of top six-passenger vehicle makers including Maruti Suzuki India, Hyundai Motor India, Mahindra and Mahindra, Tata Motors, Honda Cars and Toyota Kirloskar remained almost unchanged. Indian automobile companies count despatches to dealers as sales. They are now hoping that the provisions in the interim budget announced yesterday, that aims to boost farm income and increase disposable income among a section of the salaried class, will give positive impetus to the customer sentiments and business environment.

Reflecting the sentiments, despatches at Maruti Suzuki India (MSI) remained low. The maker of Wagon R and Baleno models dispatched a total 139,440 against 139,189 units, an increase of a mere 0.2 per cent in the same month last year. The sales were dragged down by a 3.5 per cent contraction in compact car models including Baleno, Swift, Ignis and Dzire. MSI's entry-level models—Alto and Wagon too saw flat sales advancing merely by 0.3 per cent. 

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Hyundai Motor India reported similar subdued volumes. The local arm of the Korean carmaker sold 45,803 units in January against 45,508 units last year. Mahindra and Mahindra, the third-largest in the pecking order, saw its sales advance 1 per cent to 23,872 units over a year ago. 

Tata Motors which saw an 11 per cent decline in its passenger vehicles sales was one of the worst performers. Sales at the maker of Tiago and Nexon models, dropped 17,826 units over 2,005 units last year.  The company attributed it to “low customer sentiments caused by non-availability of retail finance and liquidity crunch in the market.” The Harrier, the SUV it launched last month, has received a good response in the market and the company is expecting to witness good volumes in the coming months as the production ramps up.

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Others also rued about the financing woes. “The tightening of vehicle financing availability has also added to the challenges in the market,” said N Raja, deputy managing director at Toyota Kirloskar Motor. Toyota’s sales fell 9.1 per cent to 11,221 units over a year ago. 

Meanwhile, bucking the slowing sales trend, Honda Cars sales jumped 23 per cent to 18,261 units over the same month last year. 

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Last month, the auto industry body, Society of Indian Automobile Manufacturers (SIAM), cautioned over slowing sales that it may not be possible to achieve the growth estimate of 7 per cent due to unavailability of funds as NBFCs are cash-strapped, interest rates are hardening which has impacted sentiments adversely. The passenger vehicle (PV) segment has recorded a growth of 4.37 per cent in the first three quarters (April-December) of FY19 selling 25,33,221 units and needs almost a two-fold growth of 8 per cent in the last quarter to meet the target of 7 per cent.

SIAM welcomed the interim budget pointing out that the increase in income tax (I-T)exemption up to Rs 500,000 is expected to positively impact consumer sentiment and consumption expenditure, which will give impetus to demand for two-wheelers and small passenger vehicles, while overall improvement in the road infrastructure will ease the movement of people and goods on the road and have a multiplier effect on the economy.