August saw monthly domestic automobile sales decline for the first time in over three years as two-wheelers, which form the bulk of sales, registered a rare slump, and the production shut down at one of the factories of car market leader Maruti brought a near-19% dip in car sales.
The bad set of numbers just ahead of the crucial festive season does not augur well for the industry. The Society of Indian Automobile Manufacturers admitted that it would re-look at growth targets and scale them down next month.
Overall sales declined by 3.9% last month to 1.35 million units, compared to the over-1.4 million units sold last August.Car sales led the slump with a 18.6% drop as only 118,142 cars were sold during the month. At the heart of this was Maruti, whose sales dropped nearly 50% to 31,653 units. High interest rates and fuel prices and the generally tepid market sentiments did not improve matters.
This was the worst month for the car industry since October 2011 — and with another fuel price hike looming, the festive season does not hold much cheer.
“If interest rates and fuel prices do not come down, the festive season would not be very positive for the sector,” said Sugato Sen, director, SIAM. “But we hear that fuel prices may go up even more. If that is the case, the government should look at bringing down excise duties. This is the time when wholesale numbers should be picking up as dealers stock-up to meet festive season demand, but this has not happened. We are entering a desperate situation.”
In July, SIAM had lowered the car sales growth forecast to 9%-11% for this fiscal due to weak macro-economic conditions, from the previous 10%-12% projection. For the overall passenger vehicles segment, it had revised the growth forecast up at 11%-13 % from 10%-12%.
A bigger concern, however, is the blip in two-wheeler sales, which by itself brought the overall industry to the negative zone in August. Spurred by rural India, two-wheelers have defied slowdowns since January 2009.
“For July and August, retail sales have been slow and I expect it to remain subdued this month as well,” said Pawan Munjal, managing director and CEO, Hero MotoCorp. “I am hopeful though that things would change from October onwards.”