Car sales expected to grow by 12%: UBS survey

In the run up to the festival season, 88% of dealers surveyed expect a sequential rise in sales over next two months

There might be some green shoots of growth visible on the ground, with a new government in place. An Auto Dealer Survey conducted by research firm UBS suggests that there could be signs of improvement in the automobile (four-wheeler) sector. Auto sales are globally considered to be a proxy for economy. In India too, these numbers are taken seriously by economists and analysts as a measure of growth in the economy.

As the economy slowed, so did auto sales numbers. In April 2014, the first month of the current fiscal, passenger car sales in India fell by double digits, diving 10.15 per cent from a year earlier to 135,000 units. By August 2014 this number had grown up to 200,174 units. The UBS survey indicates there will be a sequential improvement in demand outlook.

UBS summed up its survey findings conducted on 40 dealers from across the country in a report written by analyst Sonal Gupta. In the run up to the festival season, around 88 per cent of dealers expect a sequential increase in sales over the next two months. Nearly 50 per cent of dealers surveyed believe that demand will pick up by more than 15 per cent over the next two months.

The survey highlighted that footfalls rose modestly over the last two months. 48 per cent of dealers reported an increase in first time customers while 25 per cent reported a decline in the last 2 months. Dealers are optimistic about sales in FY15 and expect a 12 per cent YoY growth. Society of Indian Automobile Manufacturers (SIAM) has tentatively pegged growth of passenger cars in FY15 to be between 5-10 per cent.

A clear shift was visible away from diesel vehicles with 51 per cent of dealers reporting a positive shift towards petrol vehicles in the last 2 months. The shift was more visible with Maruti’s dealer with 82 per cent of them indicating a shift. With petrol premium over diesel dropping to only 16 per cent UBS feels the shift to petrol cars to accelerate going forward.

According to UBS, dealers from all companies expect growth in FY15. Maruti dealers were most positive expecting 15 per cent YoY growth followed by Mahindra at 12 per cent YoY. On the inventory front 68 per cent of dealers held more than four weeks of inventory, with 20 per cent carrying more than 5 weeks of inventory. Some dealers indicated that inventory levels were high in anticipation for strong demand during the festival season in Sep/Oct.

Overall dealers indicated a small improvement in enquiry conversion rates above normal, also there was a small downtick in financing rates for customers.

With the first quarter of the current fiscal showing a sharp improvement in GDP numbers to 5.7 per cent as compared to less than 5 per cent earlier, likelihood of better auto sales numbers in the festival season would help keep the number high going forward.