Maruti helps pull back car sales after nine-month slump

After nine long months, passenger vehicles sales jumped back to the positive territory with a 15.37 per cent growth in August, prompting some inspiring action at the stock exchanges and also giving hopes of positive action in the market during the upcoming festive season. Total sales of 1,33,486 cars in August this year compared with 1,15,705 last year were largely led by surging sales of country's top carmaker Maruti Suzuki, which posted a 52 per cent jump on lower base of last year when its Manesar plant was under a month-long lockout in August 2012 following a violent labour unrest in which a senior executive was killed.

Maruti Suzuki's August performance has snapped the nine-month negative streak of the Indian car industry that remains plagued with rising fuel prices and high interest rates on auto loans. Other passenger vehicles segments continued to remain in the negative territory. Utility vehicles sales dipped 13 per cent last month, while sales of vans such as Maruti Omni & Eeco fell by a sharp 19 per cent.

Auto industry body the Society of Indian Automobile Manufacturers (SIAM) said that demand in the domestic market remained weak and the yearly performance could remain negative for the entire fiscal. "Passenger car sales have been falling since last November. There has been no fundamental change in the economy that would improve sentiments in the domestic market. We would be reviewing our full-year forecast in October and going by the grim economic scenario, sales are expected to remain negative for the 2014 fiscal," said Sugato Sen, deputy director general, SIAM. SIAM has predicted a high 3-5 per cent growth for passenger cars for the current fiscal in April this year, which it has toned down slightly in its second review in July.

Major industry players like Tata Motors, Mahindra, Toyota Kirloskar Motors posted negative sales in August. Some companies, driven by the demand for their newly launched cars and SUVs, like Ford India and Honda Car India remained positive last month. The overall upbeat positive sales boosted the investor confidence in automotive companies.

Auto analysts added some positive outlook to the market. "After nine months of decline, the automotive market has finally observed some positive growth. However, there is not much to read into this small upward shift. Production has grown by 15 per cent, as there was a strike at a Maruti plant during August last year. There is still a negative sentiment dominating this market due to increasing oil prices, hike in car prices and weak economy. But with the festive season around the corner, it is expected that the automotive sector will gain some momentum in the next 3-4 months," said Puneet Gupta, associate director, IHS Automotive Sales Forecast.

While Arun Agarwal, auto analyst with Kotak Securities, said that passenger vehicles continue to face rough patch due to prevailing economic uncertainties. "Indian auto companies are currently going through a tough phase with volumes declining across segments. Prolonged weakness in the economy, coupled with high interest rates and inflation has had a significant negative impact on the domestic demand. On a positive note, good monsoon can bring some improvement in rural demand. Revival in tractor demand has been the only positive in the current gloomy scenario."

The silver lining for the Indian automobile industry was the 4 per cent jump in sales of motorcycles, and scooters remained high on demand trajectory with a 21 per cent growth last month. The two-wheeler segment posted a 7 per cent year-on-year growth that was the highest across all segments of the Indian auto industry last month. "A good monsoon has had an impact on rural sales of two-wheelers, especially that of motorcycles. We expect this to continue and the rural demand could also have a slight positive impact on car sales," Mr Sen added.

During August this year, two-wheeler market leader Hero MotoCorp posted a 2 per cent rise in its domestic sales to 3,95,180 units as against 3,88,903 units last year. While rival Honda Motorcycle and Scooter India's motorcycle sales grew by 49 per cent to 1.44 lakh units even as Bajaj Auto's bike sales declined 23 per cent to 1,50,989 units last month.

Weaker rupee helped Indian companies to increase exports with a 25 per cent monthly jump led by a 63 per cent rise in passenger cars. Country's largest car exporter Hyundai Motors shipped 29 per cent more cars in August, while Maruti SuzukiBSE 1.69 % more than doubled its export volume to 11,305 cars last month.