Rural distress puts May car sales in low gear

Volume growth slides to 7%; launches, urban demand might help close year on positive note

Domestic passenger vehicle sales changed gears in May after a speedy start in April, with Mahindra & Mahindra (M&M), Toyota and Ford reporting declines, and Hyundai and Honda showing marginal growth.

The clear winners were Maruti Suzuki and Tata Motors, growing 13 and 21 per cent, respectively. The sector volumes grew seven per cent, against a 16 per cent surge in April. This is the second consecutive month of double-digit growth for Maruti. Sales grew 27 per cent in April. The company, with a 46 per cent market share in passenger vehicles, sold 102,359 vehicles during the month in the domestic market. Volumes were driven by models such as the Alto K10, Celerio and Ciaz.

On the BSE exchange, the Maruti stock closed at Rs 3,870.20 apiece, up 2.24 per cent over the previous close, even as the benchmark Sensex remained flat.

“Maruti expects double-digit growth this year. We saw a good increase in April. There is no serious worry about sales,” Maruti Suzuki Chairman R C Bhargava told Business Standard on Sunday.

Closest competitor Hyundai Motors said its domestic sales grew 3.4 per cent in May to 37,450 vehicles. Hyundai had posted a 9.5 per cent increase in sales in April.

Rakesh Srivastava, senior vice-president (sales and marketing) at the Indian subsidiary of the South Korean automobile giant Hyundai, said the market was experiencing low growth with decreasing contribution of rural and diesel vehicle sales.

Unseasonal rain and hail in March-April have hit crops even as uncertainty about the monsoon remains. Fuel prices have started moving up on a weakening rupee and firmer global crude oil prices. The price of petrol and diesel went up 10.7 per cent, respectively, in May to Rs 66.29 and Rs 52.28 a litre (Delhi).

M&M saw its sales shrink seven per cent to 18,135 vehicles in May. The drop follows flat sales growth in April. The company hopes an interest-rate cut will bolster sales.

“The sector has been showing signs of recovery and an interest-rate cut, if considered, will accelerate growth. At Mahindra, we hope to see improved sentiment with higher levels of economic activity,” said Pravin Shah, president and chief executive (automotive).

Continuing its good April performance, when sales grew 17.6 per cent, Tata Motors reported an increase of 21 per cent in May. The company said growth was driven by new models such as the Zest and Bolt, and an early response to the new GenX Nano.

Honda Cars India, which saw sales grow about 14 per cent in April, has reported a rise of 0.51 per cent to 13,431 vehicles in May. Toyota Kirloskar Motor’s sales dropped marginally to 11,511 vehicles in May on a planned plant maintenance shutdown for two days during the month.

Volkswagen reported a sharp jump of 57 per cent in sales, though on a small base of 2,657 vehicles in May last year. Michael Mayer, director, Volkswagen Passenger Cars, said sales were being driven by the Polo and the new Jetta.

Ford India’s sales declined for the second month by 22 per cent. In April, it saw volumes drop 26 per cent.

Overall sales for the domestic passenger vehicles sector grew by 3.9 per cent in the financial year ended March, to 2.6 million vehicles. Maruti’s Bhargava said he expected sales to touch three million in 2015-16, implying a growth of 15 per cent during the year.

“Model launches and improving urban sentiment are driving sales. We expect ongoing economic reforms, lower commodity prices, monetary easing and accelerated infrastructure investment will help the sector close 2015 on a decent note,” said Amit Kaushik, associate director at IHS Automotive.