Festive Season Fails To Spark Auto Sales

There is no better time for some industries to expect a reversal in the downward trend in sales than the festive season. This is particularly true in case of those sectors where the decision to buy or not is heavily discretionary. The Auto sector being one of them had been banking on the festive season for a reversal in the downward trend seen in sales for quite some time now. All automobile manufacturers, apart from a few like Mahindra & Mahindra (M&M) and Honda Motorcycle and Scooter India (HMSI), have been witnessing consistently declining sales on a YoY basis. Although the industry expected a revival in sales this festive season, the reality has turned out to be rather disappointing. Sales trends have not seen any drastic change in November 2012 and continue to remain weak.

Most of the segments have been affected by factors like a weak industrial output, delayed monsoons, high fuel prices and high interest rates thus reducing demand across the board. The overall result of these factors has seen a change in trends not for the sales but for the preferences of customers. Sales of Light Commercial Vehicles (LCV), Utility Vehicles (UV) and diesel passenger vehicles has been better as customers turned more price sensitive. Companies rightly positioned have been performing well and the rest have been waiting for an improvement in economic trends.

Four-Wheelers

India’s largest car maker Maruti Suzuki (MSIL) saw its overall sales grow by 12.45% on a YoY basis in November 2012. Although this number seems impressive, it has resulted out of built-up orders as a result of the production lockdown at the company’s Manesar facility.

Contrary to this, Tata Motors saw its sales decline by 13.44% in November 2012, on a yearly basis. The company saw a major decline in sales of Passenger Vehicles (PV) and Medium & Heavy Commercial Vehicles (M&HCV) of 34.99% and 40.89% respectively. In fact, it had its Jamshedpur facility shut from November 29, 2012 to December 01, 2012 to avoid an inventory pile-up.

Sales trends have been no different for other four-wheeler companies with sales of Toyota and Hyundai declining by 25.82% and 2.29% respectively, while Ford saw only a marginal increase of 0.63% in its sales.

Among all, M&M has been a clear outperformer having recorded a YoY sales growth of 18.22% in November 2012. The company’s growth has been supported by robustness in the sales of PVs and LCVs which grew by 38.12% and 7.42% respectively.

Two-Wheelers

The situation has been gloomy for two-wheelers as well. Hero, Bajaj and TVS have consistently underperformed in all the months of FY13 while HMSI has been a constant outperformer. The trend continued in November 2012 too.

Although HMSI outperformed its peers, its growth has been relatively lower than what it clocked during the previous months. The average YoY growth from April to October FY13 for HMSI has been 46.03%. This reduced to 12.24% in November 2012. HMSI also saw a decline of 3.86% in sales of scooters in November as compared to the same month last year.

So as you see, there is nothing to cheer about the festive season for automobile companies as the environment in which the industry operates in has been really below par. It looks like there could be no improvement in the situation till the end of FY13. 

Domestic Sales Growth For November 2012