 "Cash crunch puts brakes on auto sector, sales lowest in 44 months")
Hit by the demonetisation hurdle, the fast-growing automobile sector in the country has posted a decline — the first this year — of about 5% in November.
Commercial vehicles, two- and three-wheelers all posted a decline. This was the steepest in the past 44 months. The sector had declined 7.75 per cent in March 2013. The last time the sector posted a decline was December 2015, when volumes fell by only 0.17 per cent.
While these are wholesale numbers (captured from sales made by companies to dealerships), the situation at the retail level was worse, especially in rural markets. Companies have introduced 100% financing options and are giving attractive discounts to bring buyers back to showrooms.
Data released by the Society of Indian Automobile Manufacturers (Siam) shows that 1.56 million units of automobiles were sold (in the domestic market) by companies last month, down 5.48% from 1.65 million units in November 2015. Sales slipped below the 2-million mark after three consecutive months. “Sales are temporarily disrupted,” said the association.
Barring passenger vehicles (cars, vans and utility vehicles), all segments of the automobile industry posted a decline. Two-wheelers, the biggest segment by volume, declined for the first time in FY17, after several months of double-digit growth. Within the two-wheeler sector, motorcycles were badly hit and reported a decline of over 10%. Scooters have reported a decline of almost 2%, a reverse trend after 44 months of growth.
Companies sold 778,178 motorcycles and 388,692 scooters last month. Hero MotoCorp, the country’s largest two-wheeler maker, reported a decline of 13 per cent in November. Its nearest rival Honda Motorcycle and Scooter reported a decline of four per cent
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Other key segments of the automobile industry — medium and heavy commercial vehicles (M&HCV), light commercial vehicles (LCV) and three-wheelers — all reported a double-digit drop in dispatches last month. M&HCV sales declined over 13 per cent while LCVs reported a drop of over ten per cent. Three wheelers reported its first decline after more than a year and fell 26 per cent in November.
Passenger vehicles fared better than rest of the segments. However, the growth of 1.82 per cent was the lowest in several months. The second and third largest player -Hyundai and M&M-reported their first decline in many months. However, the situation was saved by a growth of over 14 per cent in volumes of country’s largest car maker Maruti Suzuki as its dealers had low inventory following the festive month of October.
Sugato Sen, deputy director general, Siam said retail situation is not “hunky-dory” but was optimistic. “Of late, people have started coming back to showrooms. We hope that December will be better and things should start improving from January.”
Siam has not revised its estimate of a double ddouble-digit in passenger vehicles for FY17. In the April-November period, domestic sales of passenger vehicles have grown 9.84%. Two wheelers have also maintained a double digit growth of 13.41% in the specified period.
“Demonetisation has impacted the sales of vehicles across segments, significantly on the sales of commercial vehicles, two wheelers and large SUVs. The negative impact in retail sales will be seen in the coming months and the two wheelers, commercial vehicles and SUVs will see a significant de-growth in the short term,” said Abdul Majeed, partner at PricewaterhouseCoopers.