Car sales hit speed breaker as two-wheelers race past

High interest rates combined with inflation and fuel prices have finally started telling on the sales of the biggies in the auto industry. Top carmakers Maruti Suzuki India and Hyundai Motors saw their sales in July stagnate while Mahindra and Mahindra witnessed a decline. Two wheeler companies, however, performed better with Hero Honda leading the growth.

Both Maruti and Hyundai were hit by sluggishness in the voluminous small car segment with the former witnessing a below par 0.2 per cent growth during the month. Hyundai, which has been riding high on the success of the i10 so far, too witnessed a reversal.

Commenting on the sales, Arvind Saxena, senior vice president, marketing & sales, HMIL said, "It has been a challenging month for the entire industry with interest rates, hike in fuel prices and inflationary pressures affecting market sentiments."

Mahindra and Mahindra saw a 6.7 per cent dip as sales of its mid-size Logan halved to 1,406 units from 2,890 units in July 2007. Tata Motors reported a total sale of 40,729 vehicles (including exports) for the month — a decline of 3 per cent compared to 42,098 vehicles sold last July. Cumulative sales grew by 2 per cent.

Sales are expected to remain under pressure in the future. "A host of negative factors have created a situation in the market where the industry is certainly going to face a slow down in demand," Saxena said.

Two wheelers, however, sprang a surprise helped by low base effect from last year. Market leader Hero Honda posted a 40 per cent jump in cumulative sales in July, while Bajaj Auto and TVS Motors domestic sales grew by 4.4 per cent and 9.1 per cent, respectively.

"We expect the growth to continue, particularly with the forthcoming festive season," said Anil Dua, vice president, sales and marketing, Hero Honda. "However, managing high double digit growth in the post-festive season will be a challenge... the second half of the fiscal is going to be crucial for the overall growth in the industry."