High insurance costs, tight liquidity and other costs are blamed for the consistently poor retail demand.
Automotive companies have begun FY20 on a sour note with a double-digit decline in April sales for four of the top five car manufacturers. The companies collectively sold 214,740 units, 16 percent lower than sales in the same month a year ago.
The car and sports utility vehicle (SUV) making companies that control 80 percent of India’s passenger vehicle market blame high insurance costs, tight liquidity and other costs for the consistently poor retail demand.
Maruti Suzuki, the country’s largest carmaker, recorded one of its worst decline in recent years with domestic passenger vehicle (PV) sales falling 20 percent year-on-year to 131,385 units in April.
Muted sales and recent announcement to exit the diesel segment from 2020 led the stock price of the Delhi-based company that makes Swift, Baleno, and Brezza to slip 3.5 percent in just four trading sessions on the BSE.
Korean brand Hyundai, the country’s second largest carmaker, posted 10 percent decline in domestic volumes in April to 42,005 units. The Delhi-based maker of Creta and i20 Elite expects volumes to recover once the general elections are out of the way. It will launch the Venue on May 21.
Utility vehicle specialist Mahindra and Mahindra reported a 9 percent fall Yoy to 19,966 units despite three launches in the recent months including the XUV300 to compete in the burgeoning compact SUV space.
Rajan Wadhera, President, Automotive Sector, M&M said, “The ongoing elections have subdued the purchase sentiment during April. This is a temporary phenomenon. We believe following the elections the auto industry will see a revival in consumer demand. Supported by a normal monsoon, we are confident of seeing higher sales in FY20."
Honda Cars India managed to buck the trend yet again. The company clocked a growth of 23 percent in April domestic sales to 11,272 units. However, the company attributed the growth to the lack of availability of the older version of the Amaze which was in the process of getting phased out.
Rajesh Goel, Senior Vice President and Director, Sales and Marketing, Honda Cars India said, “HCIL’s April sales growth is primarily due to a lower base effect, as there was no Amaze in the corresponding month last year during model runout.
“The ongoing elections and overall subdued market sentiment continue to affect the sales momentum. Going forward, the industry is heading towards a tougher year impacting sales due to volatility in fuel prices, increase in car prices owing to new regulations and stricter inventory control for a smooth switchover to BS6 regime by year-end,” Goel said.
Toyota Kirloskar, which makes Etios and Fortuner in India, said its April sales dipped by 22 percent to 10,112 units. The month also marked the supply of the first batch of Suzuki-manufactured Balenos to Toyota. A total of 364 units of the premium hatchback were supplied by Maruti to Toyota during April. These will be sold as Toyota Glanza in June.
N Raja, Deputy Managing Director, Toyota Kirloskar Motor said, “The industry is currently experiencing a slowdown due to the uncertainty of upcoming general elections that looms over the market and this slow pace is expected to continue until the new government is formed.”
