Auto sales decline 7-8% in April 2013

The trend in the passenger vehicle industry continued to wobble in April — the start of the new financial year, continuing from where it left last fiscal, when India's car market saw sales falling 6.7%, the first drop in 12 years. Adding to the woes, an increase in excise duty on sports utility vehicles effective from April also pulled down the growth of the fastest-growing utility vehicle space. 

ET learns the overall passenger vehicle market, which includes utility vehicles, has posted a decline of 7-8% with sales of about 2.02 lakh units, while passenger cars have posted a steeper decline of 9-10% (1.53 lakh units approximately). This is over a low base of April 2012. Domestic two-wheeler sales for April, however, grew by 1-2%. 

While Maruti Suzuki's sales for April 2013 were flat, Hyundai India, Tata Motors, and Toyota Kirloskar posted a decline of 7%, 49% and 37%, respectively. Senior industry executives that ET spoke to aver that had it not been for the festivals of Navratri, Ugadi, Vishu, Bihu or Gudi Padwa in various parts of the country, the decline in sales would have been even steeper.

The automobile industry have initiated measures to correct production and inventory. The volumes are falling despite launching new variants and facelifts, they said. What's worrying the industry is that even the utility vehicle segment — that drove the overall market with over 50% growth last fiscal — has hit a speed breaker, with volumes growing in lower single digits after the excise duty increase in the Budget. 

Excluding Quanto, M&M posted a 2-3% decline in UV sales. Maruti Suzuki's UV sales fell 5% in April 2013 with sales of 5,318 units, and Toyota Kirloskar posted a decline in UV sales (Toyota Fortuner and Innova) of 30-40% in wholesale despatches, whereas retail sales were much better with the company posting a decline of 10-11% 

Pravin Shah, chief executive, automotive division at Mahindra & Mahindra, said, "We are extremely disappointed that the additional 3% excise duty on SUVs has not been reversed in the Finance Bill. If it had been reversed, it would have brought some cheer and momentum for SUV makers and provided them with a level playing field." 

"We remain cautiously optimistic of the current situation and do hope that with a likely cut in interest, the auto industry will look up," Shah added. Sandeep Singh, deputy MD & COO, marketing and commercial at Toyota Kirloskar, said, "The market continues to be sluggish and is expected to take some time to revive. We have taken measures to reduce inventory, both at our end as well as at the dealers' end." 

"There are few products in the market, which are selling without a discount. The environment is so tough that the companies are in a Catch-22 situation — prolonging discount is hurting the bottomline, and without discount, volumes are not taking off, leading to piling up of inventory. It is a tough balancing act right now," said a senior executive of an MNC, requesting anonymity. 

The growth in the market is only seen on account of specific models like Renault Duster, Maruti Suzuki Dzire and now Honda's new compact sedan Amaze, which has got off to a decent start.  Jnaneswar Sen, senior VP - marketing & sales at Honda Cars India, said, "Amaze has received tremendous response from customers despite the slowdown in the industry. We are confident that Amaze will drive our growth in this fiscal." 

However there are some who see the glass as half full. Despite the overall glum environment, there is a glimmer of silver lining emerging. According to Rakesh Srivastava, senior VP, marketing and sales at Hyundai India, the market will bottom out soon. "While the overall market continues to remain under pressure, the silver lining is: demand for petrol cars is gradually recovering (with falling petrol prices). As for Hyundai, we are producing to our full capacity strategically balancing between exports and domestic sales, targeting high growth rates in exports while also increasing substantial market share in the domestic arena," said Srivastava. 

In the two-wheeler space, while Hero MotoCorp and TVS Motor Company have posted a decline of 9% and 5.5%, respectively, the Japanese two-wheeler majors Honda Motorcycle and Scooters India (HMSI) and India Yamaha Motor have bucked the trend. HMSI posted record sales of over 2.49 lakh units in April 2013 growing by over 29% year on year, whereas Yamaha grew by 33%, led by its new scooter Ray. YS Guleria, senior VP, sales & marketing at Honda Motorcycle and Scooters India, said, " We have posted a growth of 30% backed by strong demand for our automatic scooters and new launches." 

Experts say the impetus from the government on increased investment in infrastructure and opening up mining in some states have brought in fresh enquiries for trucks. But the results are mixed so far. While Tata Motors posted 5% growth in domestic commercial vehicle sales, Eicher posted a decline of 7% in April.