Automobile sales start on a good note in the festival season.
The macro clouds with slowing growth and high interest rates mean the festival season has a greater significance for automobile manufacturers this year. The season started in August-end with Ganesh Chaturthi, and, with Dussehra and Diwali bunched in October this year, these months are critical for notching volume growth.
The season appears to have started on quite a positive note across the industry. Surpassing expectations, Hero Motorcorp notched a 27 per cent year-on-year (y-o-y) growth, nine per cent higher than the previous month. The total volumes for TVS Motor and Bajaj Auto grew 17 per cent and 18 per cent y-o-y, respectively.
According to analysts, this was boosted by a strong export inventory push ahead of a change in the Duty Entitlement Pass Book tax refund scheme (effective October 1), given the lower incentives for exporters. Earlier, an Enam report had indicated that companies would likely take price increases to offset the difference and protect profitability. If that happens, export volumes in the next few months should reflect how demand responds.
The total four-wheeler sales were just a per cent lower than last year. Excluding Maruti’s skewed numbers (given its production issues due to the labour strike), volumes were actually 13 per cent higher y-o-y. Analysts believe that while sales in the Rs 3-5 lakh segment have been hit because of fuel price increases and a higher EMI outlook (with the rise in interest rates), the higher priced segments haven’t seen a similar crunch. However, diesel-based engines are becoming more popular, which is evident in strong utility vehicle (UV) sales.
A good monsoon has worked well for Mahindra & Mahindra, which showed robust growth, decrying the slowdown seen in the sector. Domestic tractor sales increased by a strong 44 per cent y-o-y, and were 50 per cent higher than the previous month. So far in FY12, strong sales in the UV and four-wheeler pick-up segments have boosted sales (up 27 per cent). Aided by the recent launch of XUV 500, this trend in the UV segment should hopefully continue.
Though Tata Motors posted a 30 per cent y-o-y growth in commercial vehicle (CV) volumes — boosted mainly by 47 per cent growth in Light CVs — its passenger cars had a poor showing (just two per cent higher). Nano volumes crashed 47 per cent only to be balanced by a 64 per cent upswing in Indigo sales. Maruti had an expectedly difficult month. Total sales were down 21 per cent y-o-y. However, it has a 100,000 booking backlog for the Swift, which should be the focus of production.
While the numbers augur well, given the element of inventory push ahead of Diwali versus the number of new launches, October volumes will tell the whole story.
