File image used for representational purpose. (REUTERS)
File image used for representational purpose. (REUTERS)

How sales of SUVs are cushioning the thud in Indian car market

Wholesales, or factory dispatches, of passenger vehicles declined 0.8% year-on-year to 263,773 units. New launches of utility vehicles, however, is providing some iota of consolation.

NEW DELHI : Passenger vehicle sales in India fell in November, indicating that the slump in the automobile industry is far from over despite a marginal recovery in the previous month.

Wholesales, or factory dispatches, of passenger vehicles declined 0.8% year-on-year to 263,773 units last month, showed data issued Tuesday by the Society of Indian Automobile Manufacturers (Siam). Vehicle sales in India are measured as factory dispatches and not retail sales.

A 10.8% fall in passenger car sales to 160,306 units was responsible for the weak performance in the passenger vehicle segment as top automakers such as Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Honda Cars India Ltd and Ford India Pvt. Ltd recorded lower sales.

The impact of lower car sales was partly cushioned by strong sales of utility vehicles, which surged 33% to 92,739 units in November, helped by continued demand for new models from Hyundai and Mahindra and Mahindra Ltd, as well as new players MG Motors India and Kia Motors India.

Passenger vehicle sales in October had rebounded slightly after falling for 11 straight months amid economic gloom and tight liquidity which have cast a pall over consumption across most sectors. Falling farm incomes and floods in parts of the country continued to plague two-wheeler sales, which recorded a 14% drop to more than 1.41 million units.

November’s weak performance came despite a narrow base as sales had fallen for the same month last year as well, said Sugato Sen, deputy director general of Siam. “Unless there is a revival in the economy, automobile sales may not see any pick up."

Sen said the strong growth in utility vehicle sales was largely due to new product launches. Last month, Kia sold 14,000 units of its Seltos sport-utility vehicle.

File photo of Seltos. (MINT)
File photo of Seltos. (MINT)

Most passenger vehicle makers, though, witnessed better retail sales in October and November, and have been able to reduce stocks of Bharat Stage IV vehicles at dealerships.

“Despite high discount levels, demand sentiment is yet to improve materially, given weak macroeconomic sentiment, viability pressures on fleet operators, and tight financing environment," said Shamsher Dewan, vice president, corporate sector ratings, Icra Ltd.

Despite the robust growth in the utility vehicle segment, the overall situation remains grim as total wholesales across categories fell 12% y-o-y in November to about 1.79 million units. Sen urged the government to boost infrastructure spending, which should support sales of commercial vehicles.

As a result of the sharp drop in activity in the manufacturing and infrastructure sectors and increased freight carrying capacity of trucks, sales of medium and heavy commercial vehicles fell 33% y-o-y to 17,039 units in November. Sales of light commercial vehicles also dropped 5.4% to 44,868 units. Consequently, the overall commercial vehicle segment saw a 15% drop to 61,907 units.

Heavy vehicle manufacturers have also been reducing wholesales to reduce inventory at dealerships before the transition to BS VI emission norms on 1 April 2020.

The economy has been going through a slowdown in the last six quarters, growing at just 4.5% in the September quarter. Consequently, Reserve Bank of India cut its FY20 growth forecast to 5% from 6.1%.

Electricity generation fell to a five-year low between January and November, indicating a broader contraction in factory output.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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