Automobile sales soar in August

Maruti Suzuki India Ltd and Hyundai Motor India Ltd, the top two carmakers, recorded robust sales last month. Sport-utility vehicle maker Mahindra and Mahindra Ltd (M&M) posted a marginal rise but Toyota Kirloskar Motor Pvt. Ltd saw a decline. Kia Motors India Pvt. Ltd and MG Motor India Pvt. Ltd—the newest entrants in India’s car industry—reported strong growth. Overall, these companies recorded a 17% increase in sales in August. The sales data is counted as factory dispatches to dealers and not retail sales.

To be sure, the growth comes on a low base of the previous year when the industry was undergoing an uncertain phase as buyers deferred purchases anticipating a cut in vehicle taxes, as well as higher fuel and insurance costs, while carmakers adjusted production as they grappled with new norms.

Experts said the current demand revival is led by rural markets and small towns.

“While the market demand is stronger in rural areas, the same in urban pockets has been relatively slower. But it is there as businesses have opened up. Rural demand is well-supported by the flourishing agriculture sector, good monsoon, increased government support via crop prices, MNREGA funding. The OEMs are also more focused on catering to the demand in the smaller towns," said Puneet Gupta, associate director, IHS Markit.

Total domestic passenger vehicle sales at Maruti Suzuki, India’s largest carmaker, jumped 21% year-on-year (y-o-y) to 113,033 units. This is an increase from the 100,000 and 51,274 vehicles sold in July and June, respectively.

Maruti’s sales in August were driven by a 27% y-o-y growth in sales of compact cars at 81,665 units. Its utility vehicle sales grew 13.5% to 21,030 units.

Second-ranked Hyundai recorded a 20% y-o-y rise in local sales at 45,809 units in August.

Tarun Garg, director, sales, marketing and service at Hyundai Motor India, credited the growth to its Creta and Venue sport-utility vehicles, and other recently launched models.

Gupta at IHS Markit attributed the increase in sales to factors such as pent-up demand, inventory building for the festive season and new car launches.

“This year, we are witnessing an extended festive period. While typically, there is market demand for vehicles during festivities like Ganesh Chaturthi, Onam and others, Diwali is in November. OEMs will remain very aggressive during these four months," Gupta said, adding that the reduced cost of ownership and attractive financing schemes are drawing customers to showrooms.

Gupta expects auto dealers to continue adding stocks but is uncertain how long the growth cycle will last.

“There is no doubt that people have lost their jobs, many sectors have contracted, businesses are under stress and the revenues have come down. All these factors may play out after the festive season," he added.

While M&M’s passenger vehicle sales grew 1% to 13,651 units in August, South Korea’s Kia Motors posted a 74% jump to 10,845 vehicles thanks to strong demand for its Seltos SUV.

Kia has also amassed more than 6,500 bookings for its new compact SUV Sonet that will be launched soon.