Automobile sales in the festive month of October fell by 14.42 per cent, dragging the overall sales growth of the industry in the first seven months of the current financial year to a mere 5.64 per cent. The total number of automobiles (which include cars, commercial vehicles, two-wheelers etc) sold in October was a mere 8.65 lakh compared with 10.11 lakh units sold in last October. This is the steepest fall in monthly sales for the auto industry in FY09.
In the last financial year, the auto sector grew by a respectable 12 per cent. However, experts fear that the number will come down to single digit this year if the current trend continues. “If this negative trend continues in the coming months, we could well post low single-digit growth for this financial year,” says Dilip Chenoy, Director General, Society of Indian Automobile Manufacturers (Siam), which released the overall auto numbers today. Industry analysts have also projected that the industry will not have a growth of more than 6 per cent in FY09.
October provides over 15 per cent of auto sales. The key reason for the sharp decline in sales has been the credit squeeze as 70 per cent of vehicle sales in the country (90 per cent in case of commercial vehicles) are financed through loans. Consumer sentiment has been further hit by the depressed stock markets.
Auto majors with rising inventory levels in expectation of high October sales are being forced to cut production by closing factories on certain days of week to bring down inventories.
Passenger car sales in October dipped by 9 per cent as a result of which the total sales growth in the first seven months of this year went down to 4 per cent. Market leader Maruti Suzuki posted a negative growth of 8 per cent in October, while Hyundai sustained momentum by registering a 10 per cent growth on the back of its best-selling models such as the i10.
The two-wheeler industry showed a sharper decline with sales dipping 14.4 per cent in October as a result of which total sales for the first seven months grew by 6.65 per cent.
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Total number of motorcycles sold last month stood at 5.38 lakh compared with 6.57 lakh for the same period of last year. The steep fall comes on the back of Hero Honda posting its first dip in sales since April this year.
While Hero Honda sales declined by about 5 per cent, Bajaj Auto posted a sharp decline of 50 per cent last month.
Sales of three wheelers de grew by about 7 per cent for the month of October. Was it not for the positive growth registered in the passengersegment of the three wheeler industry (grew by 16.21 per cent) the entire segment would have slid further.
The flat sales of commercial vehicles witnessed between April - September which grew by 4% turned into a steep dip in growth in October. Sales for the month of October dipped by a whopping 36 per cent. While lack of credit continues to affect sales in this segment, analysts attribute the overcapacity in freight - built during the low interest rate regime, as another reason for sluggish sales.
As for pick up in sales over the coming months, industry executives say the recent measures taken by the RBI by relaxing the CRR, SLR and repo rates is yet to feed through the system to reach the retail end. They say the intended effect of the RBI could take effect over the coming months which could boost sales and help the industry post double digit growth. Also, the expected launch of the Maruti’s A Star and Tata Motor’s Nano could also perk up demand towards the second half of the financial year. The other measures put in place by auto companies are interest rate subvention, andputting up best selling brands that survive tight credit conditions.