Saturday , April 17 2021

The car wreck has been accumulating and sales in July have been the worst in nearly 19 years

The Indian passenger vehicle industry suffered its worst sales in nearly 19 years in July as a slowdown in the economy, higher property costs and floods in some states deterred buyers.

Sales fell 31% to 200,790 vehicles last month from 290,931 units a year earlier, according to figures released Tuesday by the Society of Indian Automobile Manufacturers (Siam). It was the worst sales performance since a 35% decline in December 2000.

It was also the ninth consecutive drop in monthly passenger vehicle sales. Sales declined in 12 of the 13 months of July 2018, highlighting the sharp slowdown in demand for the world's fourth largest auto market.

In July, passenger car sales fell 36% to 122 956 units, while motor vehicles fell 15% to 67,070 units. Vans dropped from 46% to 10 804 units. The Siam Industrial Authority markets car wholesale or factory shipment, not retail.

The decline in utility vehicle sales has occurred despite the recent introduction of Mahindra and Mahindra Ltd's Mahindra and XUV300 models, Hyundai Motor India Ltd's manufacturing site and MG Motor India Ltd.'s Hector model. The new models show strong demand despite the weakness of the overall market.

Maruti Suzuki India Ltd has reduced the wholesale sales of its compact Vitara Brezza sports car due to weak demand, increasing competition and its recently announced plans to discontinue diesel vehicles starting next April.

Hyundai and Mahindra and Mahindra reported sales of 10% and 15%, respectively, in July.

Weak domestic economic activity and escalating global trade tensions have led the Reserve Bank of India to reduce India's growth forecast for 2019-20 to 6.9% last week from its June forecast of 7%. The slump in liquidity caused by the banking crisis in late 2018 has exacerbated the troubles of the automotive industry. Severe flooding in key states such as Maharashtra, Kerala and Karnataka before the start of Onam and Ganesh Chaturti also affected the state of the automotive industry.

For commercial vehicles, the economic slowdown coincided with an increase in truckloads, which led to a sharp drop in sales as fleet owners could carry more freight on their existing trucks. Lower demand from agriculture and other sectors also contributed to the weak market as fleet owners witnessed a decline in rents.

Sales of medium and heavy commercial vehicles fell by 37% in July to 17 722 units, while light commercial vehicles decreased by 19% to 39 144 units. Total sales of commercial vehicles fell 26% to 56,866 units.

The sharp contraction in consumption in both urban and rural markets and the increase in third-party insurance premiums continued to adversely affect motorcycle and scooter sales. In the two-wheeler segment, total shipments fell 17% in July to 1.51 million units. Motorcycle sales fell 19% to 933,996 units, while scooter sales fell 12% to 526 504 units.

As delays intensified, automakers announced a shutdown of their factories to adjust stocks. Tata Motors Ltd, India's largest commercial vehicle manufacturer, has closed its Jamshedpur and Pune plants for up to 12 days. Ashok Leyland Ltd, the third largest commercial vehicle manufacturer by volume, closed its Pantnagar facility for nine days last month amid weak demand.

Among carmakers, Maruti cut production for the sixth consecutive month in July to control dealer stocks.

"There is no point in pushing stocks at dealers when there is no market demand. We will call about production after looking at the market situation. We have an inventory of just over a month with our dealers as retail sales are under pressure, "said RS Kalsey, senior executive (sales and marketing) at Maruti Suzuki in a recent conference call with analysts.

Car and two-wheel makers have tended to start adding to dealerships since August in anticipation of higher sales during the festival season, which begins with Onam in August and ends with Diwali in November.

Vishnu Matur, Siam's CEO, said the decline could only be arrested if the automotive industry received a government financial package. The flood situation in countries like Maharashtra will further affect consumer sentiment, he said.

"Fortunately, this time of the holiday season will be a little late. So if any help comes from the government, then we can expect demand to increase during the festive season, "said Mathur." The automotive industry also supports the steel, chemicals, textiles and other sectors and any slowdown will affect the wider economy. Demand for the rural market has also dropped significantly and the double-digit decline in motorcycle sales is an indicator of the demand situation in rural areas. "

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