New Launches and Higher Bank Advances Spur February Sales

Experts see auto market decline bottoming out

After a worrying slide in vehicle sales during the last 6-7 months, Feb'09 witnessed an upturn helped by the combined effect of a number of factors. The turnaround was facilitated by the low base of February last year when the customers had withheld their purchases in anticipation of duty cut in the Union Budget. The buoyancy in car and two-wheeler sales was also aided by the new launches, significant excise duty cut as a part of the stimulus packages, higher disbursements by the public sector banks and comparatively lower interest rates.

Passenger Vehicle sales, including passenger cars, UVs and MPVs, during the month of Feb'09 in domestic market stood at 145,019 units, a 15% rise over 126,077 units of domestic sales in February last year. Similarly, two-wheeler domestic sales aggregating 630,849 units grew by 16.2% y-o-y.

Domestic sales of commercial vehicles totalled 31,069 units during the month - down 31.7% from 45,478 units clocked during the previous February. While CVs continued to be in the negative terrain, there is enough indication to suggest that the worst is, perhaps, over.

The pace was set by car market leader Maruti Suzuki India Ltd that achieved its highest ever domestic and total sales in Feb'09. The company also registered the highest ever export sales.

In Feb'09, the company sold 70,625 units in the domestic market, up 19.1 per cent over corresponding month last year. The previous highest monthly domestic sales were 67,005 units recorded last month (Jan'09).

Led by A-star, in Feb'09, Maruti Suzuki exported 8,565 units. This is higher than the previous best export figure of 8,282 units recorded in Mar'04. February also saw the company surpassing its cumulative export sales recorded during fiscal 2008-09.

In all, the company sold 79,190 vehicles in Feb'09 - up 24.1 per cent over corresponding month last fiscal. The previous highest total sales were registered in Jan'09 (71,779 units).

Hyundai Motor India Ltd (HMIL), the country's second largest car manufacturer and the largest passenger car exporter, witnessed a 45.3% growth in its domestic sales. While the cumulative sales increased by 31.9%, the exports grew by 18.3% over Feb'08.

HMIL's total sales for Feb'09 stood at 38,254 units against 29,001 units of Feb'08. The domestic market accounted for 21,215 units, compared to 14,600 units for the same month last year, while the exports totalled 17,039 units in Feb'09 against 14,401 units a year ago.

The segment-wise cumulative sales of HMIL in the month of Feb'09 read as follows: A2 Segment (Santro, i10, Getz & i20) - 34,285 units; A3 Segment (Accent & Verna) 3,900 units; A5 Segment (Sonata Transform) 66 units; and SUV Segment (Tucson) 3 units.

Honda Siel Cars India (HSCI) clocked a staggering growth of 47.83%. The company reported a robust 5,579 units in sales for the month of Feb'09 as against 3,774 units in Feb'08 making it the highest ever for a month.

 
This steep growth was fuelled by the success of its leading model - the new Honda City. HSCI sold 4,739 units of the award-winning car in the month. Honda City won 10 awards including Indian Car of the Year (lCOTY 2009) in Feb'09. Modelwise sales figures of HSCI during Feb'09 are: City - 4,739 units; Civic - 530 units; CR-V -107 units; and Accord - 203 units.

Ford India selling 2,636 cars in domestic market during the month posted a growth of 8.3% y-o-y.

General Motors India managing domestic sales of 4,860 units in Feb'09 stayed in the negative territory. Its February sales comprising of 945 units of Chevrolet Tavera, 746 units of Chevrolet Aveo, 89 units of Chevrolet Optra, 2,940 units of Chevrolet Spark and 201 units of Chevrolet Captiva were down 12.6% y-o-y.

Tata Motors' domestic sales for the month of Feb'09 added up to 42,493 units, the highest in the last 4 months. Domestic commercial vehicle sales at 23,454 units were the highest since Sep'08, while domestic passenger vehicle sales at 19,039 units were the highest since May'08. The company's total sales (including exports) totalled 43,807 vehicles, also highest in the last 4 months.

TML's commercial vehicle sales in Feb'09 in the domestic market stood at 23,454 vehicles - 25% lower than 31,317 vehicles sold in Feb'08. Its domestic sales of passenger vehicles in Feb'09 at 19,039 units were 1.5% higher y-o-y. Passenger vehicle sales were in the positive territory only for the second time since May'08.

Ashok Leyland's domestic sales of 2,669 commercial vehicles during the month were down 61 % y-o-y but witnessed a 33% sequential growth over Jan'09.

Despite being affected by continued high interest rates, lack of retail credit and the ongoing economic slowdown, two-wheeler segment turned in a decent performance.

Market leader Hero Honda Motors Ltd (HHML) led the surge in two-wheeler sales. HHML, the world's largest two-wheeler manufacturer for eight consecutive years, continued to drive industry volumes with a robust 24 per cent growth in the month of Feb'09 over the corresponding month in 2008. Hero Honda reported sales of 329,055 units (including exports) in the month of Feb'09, as compared to 265,431 two-wheelers in Feb'08.

Hero Honda continues with its accelerated growth story in an otherwise not-so-happy scenario. In the period Apr'08-Jan'09, while overall industry grew by 1.7 per cent, Hero Honda grew by 10.7 per cent. Now with its healthy performance in February, Hero Honda's YTD growth has further gone up to more than 11 per cent.

TVS Motor Company too posted a growth of 13% clocking total two wheeler sales of 107,301 units in Feb'09 against 95,235 units in the corresponding month of the previous year. Cumulative growth in sales for the current financial year since Apr'08 stood at 3%.

The company exported 16,583 units of two wheelers in Feb'09 as against 12,523 units a year earlier, witnessing a growth of 32%. TVS exports during the fiscal have stayed on high growth trajectory rising by 43% during the period Apr'08 to Feb'09.

Likewise, Honda Motorcycle and Scooter India and India Yamaha witnessed healthy growth in their sales during the month.

Bajaj Auto was the only exception and stayed in the negative terrain. The company's domestic sales aggregating 90,873 two-wheelers (108,614 two-wheelers a year ago) during the month declined by 16.3%. The exports of 41,520 two-wheelers, though a healthy figure, encountered a speed-breaker and fell by 18.4% y-o-y.

Uptick in car and two/three-wheeler sales is good news. However, there is a lurking fear in the market. While situation remains challenging, transmission of policy action to economic response is discernible. Public sector banks have become proactive and are lending aggressively. Part of the arrears received by the Government employees arising out of the Sixth Pay Commission recommendations is translating into the increased demand for consumer durables. As the implementation spreads to the States and public sector enterprises, auto industry is likely to benefit from the increased spending.

The continuing slide in CV sales is due largely to the slowing economy and consequent dip in freight movement. However, the sales are expected to pick up in March when companies and fleet owners are likely to buy more vehicles to avail of the higher depreciation benefit that has been raised to 50% for commercial vehicle purchases up to 31st Mar'09. Secondly, the Government plans to buy 15,000 new buses under the JNNURM. Thirdly, the Defence forces are going to place a big-ticket order for purchase of vehicles in the next two quarters.

Although industrial production during the month of Jan'09 recorded a negative growth of 0.5%, yet, the latest industrial growth numbers hold out hope. As economic slowdown deepens in other markets, industrial activity in India has hovered around the levels seen last year. Even 2% contraction for December has been revised to a better-looking negative growth of only 0.6%. The strong 15.4% growth in capital goods segment, though off a low base, should put at rest niggling fears of precipitous decline in new investment. Therefore, the turnaround of auto market may be round the corner.