Vehicle Sales in Slow Lane

After clocking a double-digit growth of nearly 30% in the past two years, vehicle sales growth has been tapering off since the advent of this financial year, as whammy of persistent high inflation, spiraling petrol prices, costlier loans and high vehicle costs, dent demand in the world's second-fastest growing auto market. At a time when soaring prices and hardening interest rates are making the plans and budgets go awry, buying vehicles has taken a backseat.

In fact, the tell-tale signs of slowdown surfaced in the last month of previous financial year. It was expected that the high double-digit growth clocked by the auto market during the last two years would moderate. However, what was not expected was that the fall would be so sharp and swift.

Passenger vehicle segment is bearing the brunt of higher EMIs and spike in petrol price. First time buyers, those graduating from two-wheelers to four-wheelers and even replacement or additional car buyers have put their purchases on hold as seen from tepid sales numbers of volume-segment cars during the month of May'11. Virtually, all manufacturers - Maruti Suzuki, Hyundai Motor India, Ford India, Tata Motors, and General Motors India, present in sub-compact/compact, entry level segment, have taken a hit. No wonder then, passenger vehicles selling 206,194 units, clocked a modest growth of 8.2% in domestic market during May'11. This pales against the heady 20% plus growth in the previous two years. New launches and robust growth in premium segment have done the rescue act and prevented passenger vehicles slipping into the negative territory. PV exports did not boast of flattering numbers either and grew by a paltry 3.4% y-o-y to 34,286 units during the month.

Commercial vehicles and 3-wheelers stayed positive and performed better than passenger vehicles. While commercial vehicles registered a 16.2% growth to clock 56,314 units of domestic sales, 3-wheeler sales at 35,991 units were up 8.6%. However, thanks to Bajaj Auto, 3-wheeler exports zoomed by 62.4% year-on-year to 32,357 units.

Bucking the trends, two-wheelers held steady with domestic sales rising by 14.5% to 1,072,287 units during May'11. Two-wheeler exports also stayed on track, growing by 31.7% to 159,663 units.

Car market leader Maruti Suzuki India Ltd (MSIL) registered a measly 1.9% growth by selling a total of 104,073 units in May'11 as compared to 102,175 units a year ago. While the domestic sales increased by 4% to 93,519 units as against 90,041 units in May'10, the company's exports continued to be in negative territory, declining by 13% y-o-y to 10,554 units during the month. The domestic sales in A2 segment comprising Alto, WagonR, Swift, Ritz, A-Star and Estilo that contribute over 66% to the company's domestic sales pie, slipped by 2.6%.

Hyundai Motor India Ltd (HMIL), the second largest player in car market, clocked a 15% jump in its domestic sales at 31,123 units in May'11 as compared to 27,151 units in May'10, thanks to its recently launched Fluidic Verna that sold 4,800 units. Exports were down 15% to 16,643 units in May'11, which nullified the gains in domestic market. HMIL's total sales in May'11 grew by just 2 per cent to 47,766 units from 46,809 units a year earlier.

The segment wise cumulative sales of HMIL during May'11 were as follows: A2 segment (Santro, i10, i20) - 40,520 units; A3 Segment (Accent & Verna) - 7,110 units; A5 segment (Sonata Transform) -14 units; and Santa Fe (SUV) -122 units.

Arvind Saxena, Director - Marketing and Sales, said, "The market has slowed down considerably after the first quarter of the year because of increasing interest rates and rising fuel prices, among other factors. HMIL, riding on the success of its recently launched Fluidic Verna that has received over 12,000 bookings, has maintained its positive growth."

 
The Figo magic that has charmed Indian customers since its launch, could not counter the drag caused by economic headwinds. Ford India's domestic sales were down 13% during May'11 to 7,046 units from 8,080 units in May'10. However, the increasing exports of Figo and numbering 2,012 units in May'11 helped Ford India finish with a positive growth of 12.1% in its total sales during the month.

"The Ford Figo's fuel efficiency, value and innovation continues to grow in reputation and popularity here in India as well as internationally, and this is driving exports into new markets," said Michael Boneham, President & MD, Ford India.

Riding on the good sales number of Etios, Toyota Kirloskar Motor (TKM) registered sales of 7,470 units in May'11 as against 6,050 units in the corresponding month last year, which translates into a 24% growth.

Sandeep Singh, Deputy Managing Director, Marketing, TKM said," The production was back to full swing from 20th May onwards, much earlier than expected. We are now back on track and are all set to launch the Etios Liva. With the increase in Etios production, we would like to bring down the waiting period to one month before we launch Liva. The launch will be as per schedule in the last week of June."

Tata Motors Ltd came up with a mixed bag of performance in May'11. While the company acquitted itself reasonably well in commercial vehicle sales, passenger vehicle sales numbers were unexciting. The total sales (including exports) of Tata commercial and passenger vehicles in May'11 aggregated 62,296 vehicles, a growth of 10% over 56,775 vehicles sold in May'10. Domestic sales of Tata commercial and passenger vehicles at 56,762 units grew by 8% y-o-y.

Passenger Vehicle Business Unit of Tata Motors sold 19,401 units in the domestic market in May'11, down 9% from 21,324 units in May last year. Sales of the Tata Nano were 6,515 units, higher by 84% over May'10 but much lower than the sales figure of 10,012 units in April 2011. The Indica range sales at 5,497 units plunged by 35% y-o-y. The Indigo range recorded sales of 4,268 units, down 35% vis-à-vis May'10. The Sumo/ Safari/Aria/ Venture range clocked 3,121 units of sale, growing by 15% y-o-y.

Tata Commercial Vehicles witnessed sales of 37,361 units in the domestic market - a 19% increase over 31,475 vehicles sold in May'10. The company's exports added up to 5,534 units in May'11 registering a 39% uptick y-o-y.

Ashok Leyland Ltd (ALL) was in negative terrain, witnessing a 15% drop in its domestic sales to 5,082 units in May'11 from 5,973 units in May'10. However, the company's exports at 643 units rose by 21.6% y-o-y.

Mahindra & Mahindra (M&M)'s domestic sales of all vehicles in its stable aggregated 31,158 units during May'11, as against 26,031 units a year ago, an increase of 19%.

Passenger Vehicles segment of M&M (including UVs and Verito) notched up a 20% growth in domestic market with sales tally of 17,288 units in May'11, while the domestic sales of Mahindra 3-wheelers rose 4.4% y-o-y to 4,498 units during the month.

General Motors India (GMI) just managed to stay positive with a meagre growth of 0.9% to record sales figure of 8,292 units in May'11 compared with 8,214 units in May'10.

Honda Siel Cars India (HSCI) saw its sales in India plummeting 43% to 2,334 units during the month of May'11 from 4,067 units in May'10. The company is currently operating on 50% of its planned production and facing severe shortage of components from Japan. It is likely to resume normal production from the festival season.

Off to a great start in FY'11-12, Hero Honda Motors Ltd (HHML) continued on a steady growth trajectory. Total sales of the company read 5,00,234 units for the month of May 2011, a healthy 14.7 per cent growth over the same month in 2010, when it had sold 4,35,933 units.

Anil Dua, Sr Vice-President (Marketing, Sales & Customer Care), HHML said, "We have crossed one-million sales mark in the very first two months of this fiscal. Setting new industry benchmarks with consecutive months of over five-lakh sales, we have put ourselves well on course towards our goal of over six million unit sales in this fiscal year (FY'11-12). Indeed, we have now scaled up capacity at our existing three plants to 6.15 million units. And now with the forecast of a good monsoon, we expect the market demand to sustain itself."

In keeping with the buoyancy in two-wheeler market, Bajaj Auto posted domestic sales of 218,321 two-wheelers in May'11, growing by 14% over 191,726 units a year ago. Bajaj Auto's 2-wheeler exports vroomed by a healthy 28.2% y-o-y to 99,668 units.

TVS Motor Company too joined the party, clocking a 16% growth in domestic sales of its two-wheelers at 158,829 units in May'11. The company's two-wheeler exports were also in top gear, recording a 28% growth y-o-y to 23,062 units.

Other two-wheeler players were also in fast lane.

With headwinds - stubborn inflation, spiraling commodity prices, hardening interest rates and rising fuel prices - lurking on the horizon, auto market is headed for a bumpy ride ahead. However, the forecast of a normal monsoon is a cause of comfort. Normal monsoon will not only cool the inflation, but will also lead to the increased rural spending. Auto market is, therefore, expected to pick up in the latter half of the fiscal.