Auto growth slows in May

Automobile sales started showing some signs of pressure under rising cost of input, high interest rates and fuel prices as sales during May registered a 8 per cent growth, a tad lower than April.

All three segments— passenger vehicles, two and three wheelers and commercial vehicles — registered lower growth rates compared to April, but the sharpest decline was witnessed in passenger cars. While car sales grew by 17.15 per cent in April 2008 on a year on year basis, in May the growth was only at 14.25 per cent.

Growth in passenger cars was led by Hyundai Motor India Ltd which grew by 47.48 per cent at 24,506 units in the domestic market. Maruti Suzuki India's sales grew by 16.13 per cent to 57,315 units while Tata Motors recorded a flat growth at 14,228 units, against 14,217 units in the same month previous year.

Two wheeler sales which had raised hopes of a revival in April also lost some momentum with a 7 per cent growth in May. Commercial vehicles grew by only 6.1 per cent while three wheeler sales declined by 2.5 per cent during the month.

'Sales have slid in May as interest rates continue to remain high but it could get worse in the coming months as the fuel price hike will have some temporary impact,' said a Society of Indian Automobile Manufacturers (SIAM) official.

Stagnating sales had a direct impact on production, as all segments barring two wheelers reported lower production growth compared to sales growth for the first two months in the current fiscal.

Passenger vehicle sales grew by 18.75 per cent during April-May 2008 over the same period last year but production grew by only 12.95 per cent. Similarly commercial vehicle sales grew 6.84 per cent but production growth was lower at 4.57 per cent. Three wheeler production actually declined during the period by 8 per cent even as sales grew by 1.16 per cent.

'Lower production growth always suggests high inventory levels and that is ominous in the shorter term. Also monsoons are traditionally a lean period for automobile sales and a turnaround can only be expected when the festive season kicks in,' said an industry analyst.