The crisis in the automobile market seems to deepening with India’s largest carmaker Maruti Suzuki India (MSIL) on Thursday reporting a massive 36.3 per cent fall in domestic sales to 98,210 units as against 154,150 units sold in the same month last year. This is the sharpest decline in wholesale numbers MSIL has witnessed in the last two decades.
Maruti’s total car sales, including to other car-makers, fell 35.1 per cent.
Similarly, Honda Cars India’s (HCIL) sales almost halved in July to 10,250 units as against 19,970 units sold in the same month last year. “It is extremely worrisome since the July 19 decline is much more severe than the Q1 decline and that too when the industry had degrown in July last year as well,” Rajesh Goel, Senior Vice President and Director, Sales and Marketing, Honda Cars said.
A prolonged economic slowdown raising fears of future cash flow among buyers, tightening of credit rules by financial institutions and poor monsoon rains were among the factors which dampened the demand not only for four-wheelers but also two-wheelers and commercial vehicles.
In more recent times, even major banks have tightened norms on disbursing loans in the sector as they seek to reduce risk. NBFCs which were a major source of consumer finance for the sector are yet to recover from the IL&FS crisis and have slowed down their lending.
Even for Hyundai, which tasted success from its newly launched compact Venue, its total domestic sales declined by 10 per cent in July compared to the same month last year.
As for MSIL, sales of its entry-level cars such as Alto and old Wagon R which were particularly strong in rural India showed a 69.3 per cent fall year-on-year as a patchy monsoon saw farmers holding on to their cash.
Homegrown auto major Mahindra and Mahindra recorded a 16 per cent decline in its domestic sales for the month of July 2019. The company sold a total of 37,474 vehicles last month as against 44,605 vehicles sold in July 2018.
In the passenger vehicle segment, which includes utility vehicles, cars and vans, Mahindra sold 16,831 vehicles in July 2019, compared to 19,781 vehicles in July 2018, registering a fall of 15 per cent, while in the commercial vehicle segment it sold 15,969 vehicles in July 2019 as against 19,284 vehicles in July 2018.
Veejay Ram Nakra, Chief of Sales and Marketing, Automotive Division, M&M Ltd. said, “The headwinds faced by the automotive industry continue as a result of subdued consumer sentiment, triggered by various factors. The industry needs stimuli to help revive consumer demand and conversions.”
Nakra expects the overall buying sentiment to improve in the run-up to the festive season, with the monsoon turning out to be better than initially anticipated.
Commercial vehicle major and Hinduja Group’s flagship firm Ashok Leyland also reported a 28 per cent decline in total sales at 10,927 vehicles in July as against 15,199 units in the same month last year. Revised axle norms which increased carrying capacity of trucks are believed to have dented the demand for CVs. Besides, the segment was highly dependent on NBFCs for finance.
Two-wheeler players too are under immense pressure. TVS Motor’s domestic two-wheeler sales stood at 2,08,489 units last month as compared to 2,47,382 units in July 2018, a decline of 15.72 per cent, while Pune-based Bajaj Auto reported a 15 per cent decline in motorcycle sales to 170,978 units. Premium bike-maker Royal Enfield's domestic sales fell 22 per cent in July to 54185.
The car dealers association – FADA - has already reported shutdowns by nearly 300 dealers owing to the drop in sales over the last year. Component makers along with SIAM, the car industry’s lobby group, have already represented to the government that unless steps were taken to reverse the trend including by cutting taxes, there would be a severe impact on the industry including job losses.