 "Automobiles: Cars, 2-wheelers in the fast lane")
The automobile industry is riding high on festive spirits. Full-blown growth has come back to several key segments, thanks to successful big launches, improved buyer sentiments in both urban and rural markets, increase in government employees' salaries and near-normal rainfall. The primary beneficiaries include passenger vehicle (cars, vans and utility vehicle), two-wheelers and the tractor industry.
R S Kalsi, executive director (marketing & sales) at Maruti Suzuki, said favourable macroeconomic factors, such as taming of inflation, easing of interest rates, favourable fuel prices and general sentiment uptick are driving buoyancy in the car sales. "The Pay Commission hike and a good monsoon have further improved sentiments. Their impact, however, is staggered and spread over several months. Rural markets, in particular, are expected to recover from the fourth quarter onwards due to good monsoons and projected bumper harvest", he said. Maruti Suzuki, which sits on a 47 per cent market share, has seen its domestic volume surge 12 per cent in the first half of FY17. Its nearest competitor, Hyundai has seen a gain of eight per cent in sales volume. Utility vehicle major Mahindra & Mahindra (M&M) has clocked a 13.6 per cent increase in dispatches. Others like Tata Motors, Renault, Toyota, Ford and Nissan have also registered growth. So, the growth is broad-based.
The Society of Indian Automobile Manufacturers has revised its growth forecast for the passenger vehicle industry to a double-digit figure from a single digit early this year. If it materialises, it will be the first double-digit growth after the 28 per cent in FY11, though on a smaller base. The industry sold a record 2.78 million passenger vehicles in FY16 and a double-digit growth on top of that means over three million vehicles might be sold in the domestic market this financial year.
Kalsi said the company was geared to benefit from this demand. "The Gujarat facility is expected to commence operations in the fourth quarter. It will give us some relief on the capacity crunch," he said.
The biggest beneficiary of the improved outlook in automobiles are two-wheelers. Having seen challenges for two years, due to weak monsoon and depressed rural sentiment, a lacklustre performance in motorcycles weighed on volumes. In the past two financial years, domestic two-wheeler sales grew three and eight per cent, respectively. But, volume growth this year is set to hit a double-digit mark after a four-year gap. In the first half of FY17, domestic volume was up 17 per cent.
"The two-wheeler industry has grown month after month since April this year, driven by demand from urban and semi urban areas. Scooters have contributed in a major way to this demand, while motorcycles have also seen a double-digit growth," said Y S Guleria, senior vice-president (sales and marketing) at Honda Motorcycle & Scooter India (HMSI), the second biggest two-wheeler player in domestic market.
HMSI has grown its sales by 23 per cent in the April-September period. Market leader Hero MotoCorp, which has a larger rural presence, has grown 12 per cent. Other top players like TVS Motor and Bajaj Auto have also registered double-digit gain in volumes.
Guleria said the industry is expected to grow at 13-14 per cent for the whole year. "The services sector is expanding and a significant push is coming from the increased salaries of government employees. Rural contribution had declined in past two years. But, this year the monsoon is near-normal and will keep the rural demand steady. The kharif harvest has started and many of these farmers will enter the market during Diwali," he said. The real impact of improved rural demand will be seen in the second half of the financial year, as circulation of money will improve post-harvest. Every player has put big stakes on 31 days of October. "Honda has lot of scope to grow its volumes. We have rolled out special offers and exchange schemes for government and PSU employees," added Guleria.
