August brings more depressing news for auto sector

Sales of four- and two-wheelers almost halved in August, compared to the equivalent month last year.

In a clear sign of the slowdown in the economy persisting, India’s automakers on Sunday reported their monthly sales numbers, which showed that sales of four- and two-wheelers almost halved in August, compared to the equivalent month last year.

The numbers indicate the upcoming festive season may not be enough to revive customer sentiment. This also led to fears that contrary to automakers’ expectations that car sales have bottomed out, the worst may not be over.

“The auto sector continues to witness high degrowth due to poor consumer sentiment. This is despite the high discounts, which make it the best time to buy cars,” said Rajesh Goel, senior vice-president and director (sales and marketing), Honda Cars India.

However, the industry expects that the recent initiatives by the government to boost liquidity in the market will show results from this month. The finance ministry recently announced measures that include giving policy certainty over Bharat Stage VI vehicles and merging public-sector banks.

Sales for India’s largest carmaker, Maruti Suzuki, fell by 32.7 per cent, the worst decline for the company ever. It could sell 106,413 units in August this year, compared to 158,189 units in the same month last year. Sales of mini cars comprising the Alto and WagonR stood at 10,123 units, compared to 35,895 units in the same month last year, down 71.8 per cent.

The compact segment, including models such as the Swift, Celerio, Ignis, Baleno, and Dzire, was down 23.9 per cent at 54,274 units, against 71,364 cars in August last year. However, sales of utility vehicles, including the Vitara Brezza, S-Cross, and Ertiga, rose 3.1 per cent at 18,522 units, compared to 17,971 in the year-ago month.

The Maruti Suzuki management has kept its fingers crossed about any uptick in demand in the festive season and has stopped pushing any new stock to dealers to keep the inventory level at a comfortable level of a maximum of 35 days.

“We are optimistic, but have to wait and watch how the festival season pans out,” Kenichi Ayukawa, chief executive officer, Maruti Suzuki, said recently. Mumbai-based Tata Motors’ sales in the domestic market declined 58 per cent, compared to the similar period last year.

The company sold 7,316 units in August, against 17,351 units in the same month last year. Mayank Pareek, president (passenger vehicles business unit), Tata Motors, said he expected things to turn around due to the government sops.

“We hope the financial package will help in improving liquidity and reduce the ownership cost,” said Pareek. 

Honda Cars India saw a 51.28 per cent decline in domestic sales at 8,291 units in August, against 17,020 units in the same month last year. Similarly, Mahindra & Mahindra (M&M) on Sunday reported a 25 per cent fall in sales to 36,085 units in August. The company had sold 48,324 units in the corresponding month last year.

“The auto industry continued to be subdued in August due to several external factors. We are optimistic and hopeful of a good festive season,” said Veejay Ram Nakra, M&M chief of sales and marketing (automotive division).

Analysts are not optimistic. “A turnaround in the industry is months away since any of the measures recently taken to deal with the sales slowdown or to prop up consumer sentiment will take time,” said Sridhar V, partner, Grant Thornton India LLP.

Photograph: Reuters.