Auto Market Remains Subdued

However, there is an indication of gradual warming up in demand

Automobile sales continued to be in the negative territory and dropped 7.45% in January 2009 compared to the sales figures for the same month last year. While commercial vehicle segment, hit severely by the slowing construction, industrial and export activities, was down deep in the dumps, other segments of market, despite the decline, gave the first indication that the fall in sales that started from September 2008 could be bottoming out and the market may limp back to the positive growth path in the next few months. Whether this optimism will be sustained depends on the easing of credit availability and softening of interests, for which there is an air of expectancy in the market that RBI may announce further measures shortly.

Passenger vehicle domestic sales in January dipped by a 6.88% to 137,284 units. Improvement in passenger vehicle sales performance considering that the segment had been had been witnessing worsening sales from October 2008 onwards, including the 14% fall in December 2008, has been contributed by a number of factors: The stimulus package announced in December, which included a significant excise duty cut of 4%; the discounts and freebies offered by the car companies, the payment of arrears to the Government employees arising out of the 6th Pay Commission recommendations; the new model launches; the reduction in fuel prices in two instalments; and increase in credit availability and softening of interest rates, not significant though.

Two-wheelers witnessed a negative growth of 4% in domestic market during the month of January 2009. This could be termed as the marked improvement in the context of 18% decline in December. Comparatively better performance of two-wheeler segment in January came on the back of decent growth numbers clocked by the market leader Hero Honda and its sibling HMSI.

Commercial vehicle sales slid deep in the negative terrain in January, plummeting 51 % to 23,157 units. The unflattering sales performance of commercial vehicles in January 2009 comes on the top of similar declines witnessed in the last four months of 2008. Three-Wheelers also continued to tread on a sticky domestic turf, tumbling by 12.3% to 26,439 units during the same month.

Giving a whiff that the recovery may be round the corner, car market leader Maruti Suzuki India Limited achieved its highest ever domestic and total sales in January 2009.

In January 2009, the company sold 67,005 units, in the domestic market, up 5.6% over corresponding month last fiscal. The previous highest monthly domestic sales were 65,216 units in November 2007.

In January 2009, the company exported 4,774 units. In all, the company sold 71,779 vehicles in January 2009, growing 5.4% y-o-y. The previous highest total sales were registered in March 2007 (71,772 units): Riding on hefty year-end discounts and freebies on offer, the company's retail sales of 76,700 units in December have been the highest ever, which has helped the company clear stocks piled up at its dealerships. Maruti's decent sales numbers were propelled by its A3 segment offerings Swift D'Zire and SX4, which grew by a robust 124% to 6,590 units in January, albeit from a low base of 2,939 units a year earlier, when Esteem was being phased out.

 
Barring Maruti, all other car majors in domestic market were hit by the slowdown bug and saw their y-o-y sales numbers falling. Hyundai Motor India, the country's second largest car manufacturer and the largest car exporter came up against a bump in the domestic market during the month, which saw a 13.5% drop in the company's car sales. However, continuing healthy exports cushioned the dent suffered by the company in domestic market. The company's exports grew by 20.9 %, which made sure that the drop of 1.3% in cumulative sales was not significant enough.

HMIL's total sales in January 2009 stood at 37,216 units against 37,700 units in January 2008. The domestic market accounted for 21,016 units, compared to 24,301 units for the same month last year, while the exports totaled 16,200 units during the month against 13,399 units a year ago.

Commenting on the January sales performance, Arvind Saxena, Sr Vice President - Marketing and Sales, HMIL said, "2009, as we had predicted, is going to be a very challenging year for the entire automotive industry. However, for HMIL, the launch of the i20 has been very positive and in the first month itself we have bookings of over 2,500 units for the domestic market. In the overseas market also, the i20 has been received very well with over 6,500 units being shipped in spite of the slowdown."

The segment-wise cumulative sales of HMIL in the month of January 2009 were as follows: A2 Segment (Santro, i10, Getz & i20) - 35,096 units; A3 Segment (Accent & Verna) - 2,057 units; A5 Segment (Sonata Transform) - 62 units; and SUV Segment (Tucson) -1 unit.

Tata Motors' aggregate domestic sales for the month of January 2009 stood at 35,704 units, the company's highest in the last 3 months. Domestic commercial vehicle sales at 17,373 units were the highest since October 2008, while domestic passenger vehicle sales at 18,331 units were the highest since May 2008. The company's total sales (including exports) aggregated 36,931 vehicles, also the highest in the last 3 months.

Tata Motors' passenger vehicle sales in January 2009 in the domestic market at 18,331 units were 9% lower than 20,119 vehicles sold in January last year. The January 2009 maintained the upward trajectory in sales since August 2008 when the Indica Vista was launched, except for the anomalous situation in November and December. The Indica range sales at 11,433 units were the highest this fiscal, but 7.5% lower than January 2008. The Indigo range sales of 3,973 units were up 37%. The Sumo and Safari accounted for sales of 2,925 units, registering a negative growth of 40% y-o-y, which the company attributed to disruption of supplies from a key vendor.

The company's sales of commercial vehicles in January 2009 in the domestic market added up to 17,373 units, which was higher than that in November 2008 and December 2008, but was 43% lower than 30,530 vehicles sold in January last year. M&HCV sales tally of 5,811 units was also the highest in the last 3 months, but again 63% lower y-o-y. LCV sales at 11,562 units declined 22% y-o-y in spite being the best in the last 3 months.

Honda Siel Cars India Ltd and, for that matter, other passenger vehicle majors also found themselves in the same situation. While growing sequentially, the car companies did not have much to write home about on their y-o-y performance.

HSCI started the New Year on a positive note with sales showing an upward trend. The company sold 5,773 units in January 2009 as against 3,667 units sold in December 2008 showing a sequential growth of 57.4%. However, it translated into a 25.7% drop compared with the domestic sales tally of 7,767 units in January 2008. Model-wise break-up for January 2009: City - 4,902 units; Civic - 511 units; Accord - 248 units; and CRV - 112 units.

Two-wheelers’ performance during the month of January 2009 fell into the same pattern as witnessed in the case of passenger vehicles. The sales numbers during the month were significant improvement viewed sequentially, but did not make a happy reading compared with the sales figures clocked a year or two years ago.

Overcoming the roadblock encountered by it in December 2008, Hero Honda rode back to the positive track. The company's domestic sales aggregating 311,030 units grew by 7.2% over sales of 290,005 units witnessed a year earlier and its cumulative sales including exports at 315,458 units rose by 5.8%.

Similarly, Honda Motor and Scooter India (HMSI) continued to make long strides, growing by 22% during the month y-o-y.

While the sales of TVS Motor Company in January were flat, Bajaj Auto could not shake off the slowdown bug, its domestic sales of two-wheelers witnessing a free fall and going down by a massive 51 %. However, the company's exports of two-wheelers continued to be buoyant and reduced the overall deficit to 34%.

There are straws in the wind suggesting that the auto industry, barring commercial vehicle segment, is slowly clawing back to recovery. The recovery may be in sight for the CV segment too. The significant cut in diesel prices, impetus provided in the interim budget to the infrastructure and rural sector development, enhanced depreciation benefits, reduction in excess truck capacity due to the steep dips in CV sales, gradual easing of credit availability and expected softening of interest rates are factors that are likely to impact positively, giving a push to the CV sales in the coming months.