India’s passenger vehicle industry suffered its worst sales performance in nearly 19 years in July as a slowing economy, higher ownership costs and floods in some states deterred buyers.

Sales fell 31% to 200,790 vehicles last month from 290,931 units a year earlier, showed data released on Tuesday by the Society of Indian Automobile Manufacturers (Siam). It was the worst sales performance since a 35% decline in December 2000.

This was also the ninth straight drop in monthly passenger vehicle sales. Sales have fallen in 12 of the 13 months since July 2018, underscoring the sharp slowdown in demand in the world’s fourth-largest automobile market.

In July, passenger car sales plunged 36% to 122,956 units, while utility vehicles recorded a 15% drop to 67,070 units. Vans suffered a 46% decline to 10,804 units. Industry body Siam releases wholesales, or factory dispatches, of automobiles, and not retail sales.

The drop in sales of utility vehicles came despite the recent introduction of models such as Mahindra and Mahindra Ltd’s XUV300, Hyundai Motor India Ltd’s Venue and MG Motor India Ltd’s Hector models. The new models have seen robust demand despite a weakness in the overall market.

Maruti Suzuki India Ltd reduced wholesales of its Vitara Brezza compact sport utility vehicle because of weak demand, emerging competition and its recently announced plans to phase out diesel vehicles from next April.

Hyundai and Mahindra and Mahindra reported 10% and 15% decline in sales, respectively in July.

Weak domestic economic activity and escalating global trade tensions led the Reserve Bank of India to cut India’s growth projection for 2019-20 to 6.9% last week from its June forecast of 7%. A liquidity crunch caused by a shadow banking crisis since late 2018 has exacerbated the woes of the auto industry. Severe floods in key states such as Maharashtra, Kerala and Karnataka before the onset of Onam and Ganesh Chaturthi are also impacting the fortunes of the automobile industry.

In commercial vehicles, the economic slowdown has coincided with an increase in freight carrying capacity of trucks, which led to a sharp fall in sales as fleet owners could carry more freight on their existing trucks. Lower demand from agriculture and other sectors also contributed to the weak market as fleet owners witnessed a drop in rentals.

Sales of medium and heavy commercial vehicles fell 37% in July to 17,722 units, while light commercial vehicles posted a 19% decline to 39,144 units. Total sales of commercial vehicles fell 26% to 56,866 units.

A sharp contraction in consumption in both urban and rural markets and an increase in third-party insurance premium continued to adversely impact sales of motorcycles and scooters. In the two-wheeler segment, total dispatches fell by 17% in July to 1.51 million units. Sales of motorcycles dropped 19% to 933,996 units, while scooter sales fell 12% to 526,504 units.

As the slowdown intensified, automakers announced shutdowns of their factories to adjust inventory. Tata Motors Ltd, India’s largest commercial vehicle maker, closed its Jamshedpur and Pune plants for up to 12 days. Ashok Leyland Ltd, the third-largest commercial vehicle maker by volume, closed its Pantnagar facility for nine days last month due to weak demand.

Among carmakers, Maruti cut production for the sixth straight month in July to control dealership stocks.

“There is no point pushing stocks in the dealerships when there is no demand in the market. We will take a call regarding production after taking a look at the market situation. We have an inventory of a little over a month with our dealers since retail sales are under pressure,” R.S. Kalsi, senior executive director (sales and marketing) at Maruti Suzuki, said in a recent conference call with analysts.

Car and two-wheeler makers tend to start adding to dealer inventory from August in anticipation of higher sales during the festival season, which starts with Onam in August and ends with Diwali in November.

Vishnu Mathur, director general of Siam, said the decline can be arrested only if the automobile industry receives a financial package from the government. The flood situation in states such as Maharashtra will further impact consumer sentiment, he said.

“Thankfully, this time the festive season will arrive a bit late. So, if some help comes from the government, then we can expect demand to pick up during the festive season,” Mathur said. “The automobile industry supports the steel, chemicals, textiles and other sectors as well, and any slowdown will impact the broader economy. Demand in the rural market has also declined significantly and the double-digit drop in motorcycle sales is an indication of the demand situation in rural areas.”

Loading...

Contents are their respective owners. This content is auto managed. To remove article send the link along with REMOVE subject line and send it to alayaran [AT] gmail [DOT] com.

Source link