Driven by a clear revival in demand for passenger vehicles - Maruti Suzuki, Hyundai Motors, Mahindra & Mahindra and Honda Siel have notched up impressive growth in sales for the month ending February -even though auto companies are skeptical on whether the momentum can be sustained for the rest of the year.
In February a strong demand for the SX4 and DZire models, has helped Maruti Suzuki record an impressive 19 per cent jump in sales in the domestic market as it sold 70,625 units in February-the highest ever in its history, breaking it previous record notched up in January this year when it sold over 67,005 cars.
With the i10 and i20 sales taking off Korean carmaker, Hyundai Motors recorded a sales growth of 45 per cent in February selling 21,215 units as compared to 14,600 units sold in the same month a year ago.
Mahindra & Mahindra saw its recently launched Xylo help the company to see a 17 per cent growth in sales of its utility vehicles to 14,720 units in February. And thanks to the new Honda City model, which was launched last month, Honda sales went up by 47.83 per cent in February hitting 5579 units.
However General Motors continued to see its sales slide dropping by 11 per cent and it sold only 4921 units in February.
Car sales had hit a bottom, falling by 0.5 per cent in April-December 08. And despite an impressive performance by Maruti in January total car sales were down by 7 per cent.
But auto companies do not expect that the January sales figures reflect a turnaround for the industry. Says R C Bhargava chairman of Maruti Suzuki: "It is very difficult to say if the worst is over considering the economic situation. What one can say is that we might not see a decline of sales now like we did previously". He expects sales growth this financial year to be in the lower single digit level.
Bhargava says that retail sales in December 08 were impressive and as a result the inventory pile up problem is now over. "PSU lending for car loans has picked up and the government excise duty cut announced in December has been a big booster, also exports of small cars in Europe has not really fallen and all this has pushed sales," adds Bhargava. He also expects easier repossession norms of cars by banks from customers who default on payments would encourage private banks to also enter the fray aggressively.
Hyundai Motors points out that the impressive sales figures in February are over exaggerated. Says Arvind Saxena senior vice president marketing and sales HMIL: “February, 2009 sales saw a slight upturn with double digit growth for the industry but the overall market situation continues to be challenging".
Saxena says that February sales are high because last year customers did not buy cars in the same month as they expected duty cuts in the budget. As a result sales got deferred to March which saw impressive numbers. Saxena warns: "We expect a fairly flat sales growth curve for the industry for the first quarter ending March, 2009".
Analysts also say that the impressive numbers might be short lived. Says Vaishali Jajoo, Sr Analyst, Angel Broking: “It's difficult to predict if the good numbers posted by the industry for February will continue beyond March because of three key reasons: The car loans offered by some PSUs are valid for a month. Once the rates start rising slowdown will creep in.”
In order to push sales Hyundai for instance is already increasing its dependence on PSU banks (which are offering cheaper interest rates and have wider coverage in smaller cities and towns) to provide loans for its customers. A senior executive of Hyundai says the share of PSU banks, which is currently at 15 per cent, is slated to go up to 28 per cent in a few months, as it will tie up with two more banks. And a leading bank points out that the share of PSU banks in the car loan portfolio has gone up from 10 per cent a year ago to 50 per cent currently.
