Auto Market Reels under High Interest Rates

The impact of interest squeeze is quite visible as reflected in the sales figures of May 2007. The domestic auto market buckling down under the weight of rising interest rates, is losing steam. While passenger vehicle segment scraped through with a positive growth of 10%, the performance of two-wheeler and commercial vehicle segments is not something to rave about.

Car market leader Maruti Udyog Limited sold 55,952 vehicles in the domestic market in May 2007 recording a growth of 9.9% over domestic sales of 50,904 vehicles in May 2006.

In all, the company sold 59,400 vehicles in May 2007. This includes 3,448 units of exports. Maruti's volume in the domestic C segment grew by 22.7 per cent. In the A3 segment, the MUL sales grew by 103.8 per cent, thanks to the interest evoked by recently introduced SX4, while the A2 segment posted a growth of 7.8 per cent during the month. The sales of M800 were down by a whopping 19%.

Hyundai Motor India (HMIL) chalked up sales of 16,643 units in the domestic market vis-à-vis 16,102 units in the corresponding month last year, recording a modest growth of 3%. Cumulative sales (including exports) for May 2007 stood at a 26,648 units with exports contributing 10,005 units. This translates into a increase of 3% over cumulative sales figure of 25,883 vehicles in May 2006. HMIL's sales segmentwise for the month of May ‘07 are: A2 Segment - 23,154 units, A3 Segment - 3,241 units, A4 Segment - 111 units, A5 Segment - 116 units, and SUV Segment - 26 units.

Riding high on the launch of Chevrolet Spark, General Motors India registered an impressive growth of 56% in its sales in May 2007 as compared to the corresponding period last year. GMI sold 5,432 units in May 2007 as against 3,478 units in May 2006. The May 2007 sales comprise of 1,807 units of Chevrolet Tavera, 1,413 units of Chevrolet Aveo/U-VA, 212 units of Chevrolet Optra and 2,000 units of Chevrolet Spark that was launched of late.

Honda Siel Cars India (HSCI) clocked a growth of 15.87% in May 2007 over the corresponding month last year. The company sold a total of 4,811 units in May 2007 as against 4,152 units a year earlier.

Ford India witnessed a big fall in its sales in the month of May 2007, registering cumulative sales figure (including exports) of 3,020 units as against 5,339 units in May 2006.

 
Mahindra & Mahindra sustained its leadership in UV segment, clocking 10,986 numbers in May 2007 as against 8,945 units in the corresponding month last fiscal. The Scorpio continued on a growth trajectory, showing a rise of 31 %.

Meanwhile, Logan from Mahindra Renault has sold 2,786 units in May. Rajesh Jejurikar, MD, Mahindra Renault, said, "The response from across the country is in line with the product's class defying strengths in terms of space, safety and engine performance. Logan has delivered much beyond our expectations. Mahindra Renault's car has a great showing of 2,786 numbers in the first month of sales. This is significant considering that we are currently only in 40% of the markets. We expect numbers to go up significantly as production and regional launches are ramped up over the next couple of months."

The Logan bookings opened in dealerships across Mumbai, Pune, Bangalore, Nashik, Delhi - NCR, Chennai, Hyderabad, Kolkata, Chandigarh, Ludhiana & Jalandhar, and deliveries started in the first week of May.

Tata Motor's Passenger Vehicle Business reported total sales of 17,580 units in the domestic market in May 2007, a decline of 3% compared to 18,115 units in May 2006. The Indica clocked 12,002 numbers, recording a negative growth of 3%. The Indigo family registered sales of 2,215 units, declining 22% from the sales figure of May 2006. The Sumo and Safari accounting for sales of 3,363 units in May 2007, continued to witness upward trend with an increase of 18% over May 2006.

TML's domestic sales of commercial vehicles in May 2007 at 20,675 units were also in the negative terrain. This represents a drop of 6% compared to 21,903 units sold a year ago. M&HCV sales stood at 10,500 units, witnessing a slide of 17% y-o-y, while LCV sales clocked 10,175 units, a growth of 10% over May 2006. Cumulative sales of commercial vehicles in the domestic market for the current fiscal aggregated 40,282 units, down 3% compared to April-May 2006.

Ashok Leyland Limited clocked 5,804 numbers (including exports) in May 2007 to register a growth of 3% y-o-y. The company's domestic sales at 5,436 units grew by paltry 2%.

The sales curve of the other two major CV players, viz, Eicher Motors Limited and Swaraj Mazda also did not show any appreciable upward movement and was more or less flat.

Slowdown in two-wheeler sales was visible across companies. The segment, being the most price sensitive, is feeling the acute pain of rising interest rates.

Hero Honda Motors Ltd (HHML), the world's largest two-wheeler manufacturer, while clocking better-than-industry performance went into negative terrain. The company sold 285,109 units in the month of May 2007 as against 303,444 units in the corresponding month last year, thereby recording a negative growth of 6%. HHML can, however, draw comfort from the fact that it continues to strengthen its market share of 50 per cent in motorcycles achieved at the end of April, even as the industry has witnessed a double digit decline in motorcycle sales in the month of May, as also the May 2007 performance is an improvement over sales volume of 262,544 in April 2007. Continuing with its new product launch focus, HHML introduced the Splendor NXG during the month.

Bajaj Auto stayed off the growth path for the fourth month running. Bajaj's two-wheeler sales at 132,039 units in domestic market during May 2007 slid 24% from 174,772 units a year ago. The company's domestic 3-wheeler sales also chipped off by 19% to stand at 12,195 units in May 2007 compared to the sales figure of 15,123 units a year earlier. In sharp contrast to its domestic sales performance, Bajaj Auto continued to notch up impressive numbers in exports of 2-wheelers and 3-wheelers, with exports growing by whopping 60% and 23%, respectively, in May 2007.

TVS Motor Company did not fare well either, clocking total two wheeler sales of 108,151 units (including exports) in May 2007 compared to 124,678 units in May 2006, which represents a decline of 13%. TVS motorcycle sales at 49,651 units witnessed a massive fall from 78,271 units recorded in May 2006. The company, in order to increase its presence in the executive segment, is developing a motorcycle, which will be launched in the second half of this year. However, TVS Scooty continued to be the market leader in the sub-100 cc scooter segment with sales of 25,280 units in May 2007, up 24% over 20,396 units sold during May 2006. On the export front, TVS Motor Company despatched 9,849 units, witnessing a growth of 15% y-o-y.

Suzuki Motorcycle India was able to clock a 31% growth in its sales at 5,100 units (including exports), albeit on a low base of 3,879 units recorded a year ago.

Yamaha Motor India, on the other hand, slipped by more than 50 per cent to register sales, including exports, of 12,178 units (25,267 units) during May 2007.

While all segments are witnessing slowdown, two-wheeler and commercial vehicle segments are particularly worst hit by the hardening interest rates. Inflation has been tapering off for some time now, which portends well for the auto industry, as interest rates may also start softening with a time lag. Nevertheless, the repeat performance of the previous 2 years is not expected in the current financial year.