High interest rates and the lack of credit appear to be keeping buyers away.
Auto companies look like they are in for a rough ride. India’s biggest car maker, the Rs 18,412 crore Maruti Suzuki, sold virtually the same number of cars this July as it did last year. The month was no better for Tata Motors - it sold fewer commercial vehicles and passenger cars compared in the same period.
Bajaj Auto’s two-wheeler volumes were up barely 4 per cent. And the price hike initiated by Mahindra and Mahindra (M&M) for its utility vehicles may not have been the right move – volumes came off a sharp 8 per cent. But bike maker Hero Honda did extremely well to post higher volumes of 40 per cent, partly because of a low base effect. Rival TVS Motors didn’t do too badly either.
The sluggish growth could continue for a while because high rates of finance, rising fuel costs and inflation, say industry analysts, are keeping buyers away. Fleet operators are shying away from acquiring new vehicles not only for price hikes, but also because operating costs have also risen thanks to higher diesel prices.
Even popular models like the Swift and Wagon R don’t seem to be finding any takers. For that matter, neither are the Santro and the i10. Hyundai Motor’s growth in the home market was a mere 0.4 per cent in July. The lack of new models has hit Tata Motors badly — Indica volumes in July declined by 27 per cent — though the Indigo showed momentum and clocked a growth of 79 per cent y-o-y, partly due to a low base effect.
While the A-Star could turn Maruti’s fortunes, manufacturers, which hike prices to pass on the higher cost of inputs, may find the going tough. M&M is expecting its new vehicle, the Ingenio, to boost sales later in the year.
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The passenger car segment grew at 12 per cent y-o-y, in the home market, during the April-June quarter but may slow down before picking up in the festival season. The Tata Motors’ management says it has not seen a contraction in the demand for CVs as yet.
However, it does not rule out the possibility that cost pressures for operators could lead to muted growth. LCVs alone fared well for Tata Motors in July; volumes for other vehicles fell marginally. Concerns about an early revival in the tractor segment remain on account of higher interest rates and deficient rainfall in some southern states.
Tractor volumes for M&M increased by a mere 1 per cent y-o-y in July in the home market. Motorcycle sales are expected to grow at around 5-6 per cent this year, though the growth in the June quarter was better at 8 per cent in the domestic market.