Bumpy Road Ahead

Passenger vehicles facing headwinds

The growth of passenger vehicles continued to show negative trend for the second consecutive month in August'11, dragged down by tepid car sales numbers. Higher lending rates & fuel prices kept buyers at bay. Despite increased discounts and incentives from car manufacturers (OEMs), the sales of existing models remained unenthusiastic. To some extent, the continuing labour problem at Maruti Suzuki also played the spoilsport.

Interest rate sensitive passenger vehicle sales in domestic market slid 6% to 191,914 units during the month from 203,872 units in August'10. Exports of the passenger vehicles on the comeback trail for some time now after being in negative terrain for about 2 years, however, stayed on course to rise 35% y-o-y to 49,642 units during the month.

Commercial Vehicle segment, a key indicator of economic health of a nation, witnessed a steady 23% growth, clocking domestic sales of 64,248 units during August'11. The healthy growth in commercial vehicles was driven chiefly by Light Commercial Vehicles that registered a healthy 34.5% growth y-o-y in domestic sales at 36,847 units in August'11.

Domestic sales of three-wheelers, losing traction, were down 9% y-o-y to 45,443 units in August'11. Exports of 3-wheelers were, however, in fast lane with a staggering growth of 50% at 32,329 units.

Bucking the inflation and higher interest rates, two-wheelers held steady with domestic sales of 1,111,340 units, which represented a 16.10% growth over the sales tally of 957,236 units in August'10.

The domestic vehicle sales across the segments reflected a 12% increase to 1,412,945 units in August'11 from 1,263,239 units during Aug'10.

Maruti Suzuki India Ltd (MSIL) recorded total sales of 91,442 units in August'11 as against 104,791 units during the same month last year, registering a negative growth of 13%. The domestic sales of the company logged 77,086 units, posting a negative growth of 17% y-o-y during the month. The company's exports, however, were on growth path to record an 18.5% increase at 14,356 units. MSIL’s sales were affected by disruption in production at company's Manesar plant due to labour unrest.

Hyundai Motor India Ltd (HMIL), the second largest player in car market, witnessed a 6.7% decline in its domestic sales to 26,677 units in August'11 from 28,601 units a year earlier. However, exports sustained momentum, growing by 10.5% to 24,345 units in August'11 from 22,035 units during August'10.

Ford India too witnessed a 7% fall in its domestic sales from 7,925 units in August'10 to 7,382 units during August'11. The company's exports showed a hefty 56% increase y-o-y during the month, though.

Riding on the success of its new offerings - sedan Etios and hatchback Liva, Toyota Kirloskar Motor clocked a whopping 84% growth in its sales at 11,693 units in August'11 as compared to 6,361 units in August last year.

Sandeep Singh, Deputy Managing Director, Marketing, TKM said, "We have registered a growth of 84% in the August sales. The growth is primarily led by our flagship model Innova and our latest offerings Etios and Etios Liva. We sold 2,710 and 2,824 units of Etios and Etios Liva, respectively, during the month. We are now looking forward to the festival season."

 
Tata Motors Ltd has got into the groove where the company's commercial vehicles are growing steadily, if not spectacularly, but the passenger vehicle sales are going downhill. The month of August was no different from the sales pattern of the previous few months. While the company's commercial vehicles were on growth trajectory, passenger vehicle sales continued to slide.

Passenger Vehicle Business Unit of Tata Motors recorded domestic sales of 16,829 units in August'11, lower by 33% vis-à-vis the same month last year. The Indica range sales dropped by 4% to 7,206 units, during the month, while the domestic sales of Indigo range plunged by 24% y-o-y to 5,100 units. The saving grace for the company was the Sumo/Safari/Aria/Venture range that recorded a growth of 15% y-o-y in domestic sales at 3,321 units during the month.

Tata Commercial Vehicles saw 43,045 units of domestic sales, a 21% growth compared to 35,585 units sold in August last year. The LCVs sales at 26,344 units grew by 27% y-o-y. M&HCV sales clocked 16,701 units, up 12% over August last year. The total sales (including exports) of Tata commercial and passenger vehicles in August'11 added up to 64,078 units, lower by 3% compared with August'10.

The second biggest CV maker, Ashok Leyland (ALL) too posted a negative growth of 4% in its domestic sales at 7,218 units in August'11 compared with 7,480 units in August'10. The company's exports showed a robust growth of 35.5% y-o-y to 1,050 units during the month.

Mahindra & Mahindra (M&M) registered domestic sales at 34,621 units during August'11, as against 26,403 units in August'10, representing a 31% increase. The Passenger Vehicles segment (which includes the UVs and Verito) were up 14%, having sold 15,664 units in August'11 as against 13,796 units during August'10.

Speaking on the numbers, Rajesh Jejurikar, Chief Executive, Automotive Division, Mahindra & Mahindra Ltd said, "We have been able to maintain a healthy growth of 30% in August, in spite of increasing pressures on the automotive industry. Verito has continued its growth momentum having sold 1,710 units in August."

Volkswagen India Pvt Ltd continued its impressive run, selling 6,091 units during August'11, which represented a healthy 72.5% uptick year-on-year.

General Motors India (GMI) sustained the growth momentum, selling 9,012 units in August'11 as against 7,889 units in August'10, recording a decent growth of 14%, thanks to the diesel variant of Beat.

Honda Siel Cars India (HSCI) clocked a healthy 25% growth with sales of 6,907 units in August compared to 5,518 units a year ago. The growth was driven by Honda City, which had Rs. 66,000 price cut recently. Model wise break-up of HSCI sales during the month of August'11 was: Jazz - 600 units; City - 5,819 units; Civic - 330 units; Accord - 132 units; and CR-V - 26 units.

Two-Wheeler held their own, beating the rising fuel price and interest rate blues.

Hero MotoCorp continued its dream upward journey with a 19% increase in its domestic sales to 491,120 units during Aug'11 over the corresponding month in 2010 when the company had sold 413,162 units of two-wheelers.

Anil Dua, Sr Vice President (Marketing & Sales), Hero MotoCorp said, "August has been a memorable and exciting month for us. We created a new name, identity and positioning, and have begun to build the company's new brand architecture. Going forward, our strategy is to make sure that we continue to delight and surprise our customers and stakeholders in the true spirit of "Hum Mein Hai Hero". We are thrilled with the response to our new brand identity and campaign. The August sales performance has set the pace for the exciting festive season ahead of us as we look to ride our present buoyancy."

Bajaj Auto was on a steady growth track with domestic sales climbing up by 8% y-o-y to 226,559 units in August'11. Exports of Bajaj two-wheelers retained their buoyancy, growing by a robust 40% to 111,495 units during the month.

TVS Motor registered an 11 % increase in domestic sales of two-wheelers at 163,705 units. The company's two-wheeler exports were on overdrive, recording a 39.2% growth y-o-y to 26,479 units.

Continuing its quest for a higher growth trajectory, India Yamaha Motor posted a 32% rise in its domestic sales at 29,934 units during August'11 as compared to 22,683 units in the same month last year. The export figures for August'11 stood at 9,556 units, while 7,778 motorcycles had been exported in August'10. The overall sales were up 30% at 39,490 units in August'11 over 30,461 units in August'10.

Other two-wheeler majors, viz., Suzuki India and HMSI also witnessed buoyancy in their sales.

With industrial production witnessing a roller-coaster ride and stubborn inflation showing no sign of climbdown, the auto market is headed for bumpy ride ahead, if not for a hard landing. Recent increase in repo rate by 25 bps is likely to harden further the interest rates for vehicle loans. Auto market, nonetheless, is now looking forward to new launches and the oncoming festive season for a turnaround in passenger vehicle sales.