Slowdown Continues to Dog Auto Market

For auto market, June 2007 was no different from the first two months of the current fiscal with sales showing no improvement. Domestic sales of passenger vehicles recorded a healthy growth of about 16%, thanks to a significant number contributed by Maruti Udyog and a spate of new offerings and variants keeping the customers' interest alive in spite of high lending rates. Regarding other segments of the industry, there is not much to write home about. CVs managed to register a modest 4% growth in the domestic market; 3-wheeler segment was down by 5%; and 2-wheeler domestic sales took a big knock falling by 10.65%. Total sales in domestic market in terms of numbers were down 6.5%. However, exports with 14% growth stayed on course and provided cushion somewhat for the industry to absorb the drop in domestic sales.

Maruti Udyog Limited (MUL) was the pick of the companies that bucked the sluggish sales trends. Car market leader sold 56,000 vehicles in the domestic market in June 2007, as against domestic sales tally of 44,626 vehicles in June 2006. In all, Maruti Udyog Limited sold 59,917 vehicles in June 2007. This includes 3,917 units of exports. Maruti's volume in the domestic A2 segment grew by 38.3 per cent, in A3 by 46.4 per cent and in C segment by 24 per cent.

The constraint in the availability of SX4 and Swift was compounded during the month in view of the weeklong scheduled maintenance shutdown of the, plants.

Hyundai Motor India Ltd (HMIL), the country's second largest car manufacturer and the largest passenger car exporter, witnessed a flat growth, with its sales figure (both exports and domestic sales) in June 2007 adding up to 27,653 cars, vis-à-vis 27,251 cars sold in June, 2006. The domestic sales accounted for 16,335 units, while 11,318 units were exported. There was a slight slippage in domestic sales from the sales figure of 17,032 recorded a year ago.

HMIL's segment-wise cumulative sales in the month of June 2007 were: A1 Segment - 23,558 units; A2 Segment - 3,983 units; A3 Segment - 24 units; A4 Segment - 67 units; and SUV Segment - 21 units.

Honda Siel Cars India Ltd (HSCI) recorded a growth of almost 27% selling 4,503 units in June 2007 as against 3,549 units sold during the same month previous year. Cumulative sales for the calendar year 2007 (January-June), increased to 32,226 units as against 25,145 units during January-June 2006, which reflect a healthy growth of 28%.

Riding high on the launch of Chevy Spark, General Motors India registered an impressive growth of 43% y-o-y with a sales tally of 4,779 units during June 2007 as against 3,346 units in June 2006. The June 2007 sales comprised of 1,550 units of Chevrolet Tavera, 1,227 units of Chevrolet Aveo, 498 units of Chevrolet Optra and 1,504 units of Chevrolet Spark that was launched May end. The company has set for itself a target of 10% market share by 2010.

 
Tata Motors Limited reported a total sale of 44,317 vehicles (including exports) for the month of June 2007, a decline of 2% y-o-y. The company attributed the sluggish domestic sales to the high interest rate regime.

The passenger vehicle business witnessed total sales of 17,418 vehicles in the domestic market in June 2007, down 5.7% vis-à-vis June 2006. The Indica recorded sales of 11,727 units, which represents 4.4% decline compared to the June 2006 sales figure. The Indigo family also saw its sales sliding by 18.4% to 2,354 units. The sales of Sumo and Safari were flat, accounting for 3,337 units in June 2007.

Cumulative sales of passenger vehicles of Tata Motors in the domestic market during the current fiscal aggregated 51,840 units, an increase of 3.9% over the previous year, with Indica notching up 34,599 units and growing by 4.3%. While Y-T-D sales of the Indigo family in the current financial year stood at 7,201 units, recording a negative growth of 13.4%, the Sumo and Safari sales numbering 10,040 units, have increased by 19.3%.

The company's sales performance in commercial vehicle segment during June 2007 was not enthusing either. CV sales of TML in the domestic market totalled 21,417 units, dipping by 0.7% from 21,565 units of sale witnessed a year ago. M&HCV sales stood at 11,763 units - down 0.4%, while LCV sales were 9,654 units, a decline of 1 %. Y-T-D sales of commercial vehicles in the domestic market in the FY 2007-08 have dropped by 2.3% to 61,699 units.

Exports of Tata Motors at 5,482 vehicles in June 2007 grew by 5.5% as compared to 5,195 vehicles exported in June 2006.

Ford India also appeared to have been bitten by the slowdown bugbear. The company saw its sales in domestic market falling by around 20% to 2,750 units in June 2007 from 3,428 units a year back, while the exports came to nought from the corresponding figure of 1,679 units.

Ashok Leyland barely managed to avoid the negative terrain by clocking a modest 2% growth with its sales figure (including exports) of 6,510 units during June 2007 compared to 6,310 units in the corresponding month last year.

Taking prevailing high interest rates into its stride, Mahindra & Mahindra came up with an impressive performance with its utility vehicle sales in domestic market zooming by 34.3% to 7,539 units from sales tally of 5,613 units a year ago.

Major two-wheelers players, viz. Hero Honda, Bajaj Auto and TVS, which together account for 90% of the 2-wheeler market found themselves on a sticky wicket.

Hero Honda Motors Ltd (HHML) registered sales (including exports') of 2,55,200 units in the month of June 2007, as against 2,78,660 units in the corresponding month last fiscal, recording a negative growth of over 8%. Consolation for the company was that despite the slowdown in the two wheeler industry, Hero Honda has strengthened its position and recorded over 50% of market share in the motorcycle category for the Q1 of 2007-08. During the month of June, Hero Honda launched a refreshed model of its scooter Pleasure.

For Bajaj Auto Limited, the first quarter has been disappointing. The June 2007 saw the company's two-wheeler sales (including exports) falling by 12% to 164,758 units from 1,88,231 units in June last year.

With 2-wheeler market reeling under the rise in interest rates, Bajaj is currently focussing on enhancing market and product mix to safeguard profitability. According to the company, since the repeat purchases represent over half of all new sales, there is an increasing evidence of their diminishing interest in the 100cc motorcycles currently available, contributing significantly thereby towards the industry-wide slowdown in sales. In the build-up to its product-centric endeavour to reverse this trend, Bajaj successfully completed the pre-production of its new motorcycle in June 2007; a national launch is scheduled for September 2007 with an initial target of 50,000 motorcycles / month to be achieved by January 2008.

Bajaj 3-wheeler performance during the month was also a bit below mark. The 3-wheeler sales (including exports) of Bajaj Auto stood at 22,866 units in June 2007 in comparison to 25,687 units in June 2006, reflecting a negative growth of 11%. The company's exports, however, growing at 42% continued to surge.

TVS Motor Company also dished out a lacklustre performance, reporting total two wheeler sales of 107,117 units in June 2007 compared to 126,290 units in June 2006. During the month, the company's motorcycle sales plummeted by roughly 40% to 47,380 units from 78,271 units notched up a year earlier.

The cold comfort for TVS is that its Scooty continues to be the market leader in the sub-100cc scooter segment, which ended up improving its sales tally marginally to 25,962 units in June 2007 from 25,148 units a year ago. The company attributed the slowdown to increased cost and stringent norms being followed by retail financiers. More than 60 per cent of the sales of two-wheelers are dependent on retail finance.

Beating the slowdown bug, Honda Motorcycle & Scooter India (HMSI) turned up trumps recording a whopping 46% surge in its domestic 2-wheeler sales from 50,437 units a year ago to 73,574 units in June 2007.

While the industry, barring passenger vehicle segment, is in the grip of slowdown currently, key macro-economic indicators and the expert opinion suggest that the industry is likely to witness a turnaround in the second half of the current financial year.