Passenger Car Sales Decline 18.5% In August

In August 2012, as compared to August 2011, the overall automobile sales declined by 3.9 per cent, the biggest dip in more than 3.5 years. Passenger car sales fell by 18.5 per cent, the highest decline in 10 months while motorcycle sales dropped 8.5 per cent, the steepest fall in over three years and exports plunged by 26.83 per cent, the highest negative in 11.5 years. These daunting figures of a troubled industry are now triggering the industry body SIAM (Society of Indian Automobile Manufacturers) to hint at a further downward revision of growth projection for passenger cars. In July, SIAM had revised its yearly volume guidance from 10-12 per cent to 9-11 per cent.

YoY Sales Growth (%)

Weak macro economic conditions, lower industrial output, a weak start to the monsoons, high interest rates leading to bulky EMIs and soaring fuel prices have all led to the cumulative effect of sales across categories either shooting in the negative or slowing down drastically. Manufacturers across the board are now looking keenly at how sales fare over the festive season and are expecting a trend reversal from the month of October 2012.

As of August 2012, SIAM data suggests record lows in the sales of passenger cars, motorcycles and exports. What came in as a real bolt was that the fast growing scooter segment grew by all of 9.95 per cent. Though this may not seem low, sales volumes are a third of what was observed in the early months of FY13. What comes across as an interesting fact is that out of every 10 new scooters sold in August 2012, 9.2 were manufactured by Honda. The scooter slowdown and the -8.5 per cent growth in motorcycle sales are a simple echo of the sales figures of two-wheelers released on August 1, 2012 and talked about in detail in our earlier article titled ‘Two-Wheeler Sales Drop Low’.

The -18.5 per cent growth in passenger car sales comes as no surprise considering the lockdown at Maruti’s Manesar plant, causing the company’s sales to drop by 40.78 per cent. Maruti has an approximate 40 per cent market share in the segment. There was a slowdown seen in the sales of Hyundai as well for August 2012. The sales of commercial vehicles and three-wheelers too showed a trend no different from the others.

With this data shocker, SIAM now plans to ask the government to provide for a stimulus package similar to the one given during the 2008-09 downturn wherein the government stepped in to reduce the CENVAT by 4 per cent. What the industry body is looking at is a reduction in the excise duty for vehicles, which was hiked across all categories in this year’s budget. Any movement on this front is likely to happen only after the festive season if the demand doesn’t manage to pick up. For now, what matters is if industry sales wake up when September ends.