Cars & Bikes Continue Their Way Downhill

Discounts and offers on automobiles have been afloat in the market since the beginning of the festive season at the end of 2012. However, heavy discounts, overly-bountiful offers and near-comical schemes have not managed to up the demand for automobiles in the country one bit.

The demand in the automobile industry has been hampered since the beginning of FY13. However, it has been robust for segments like utility vehicles (UVs) and light commercial vehicles (LCVs). Those manufacturers who are rightly placed to make the most of this skewed demand have been getting the benefits.

Among these are Mahindra & Mahindra (M&M), Toyota and Renault. The three have seen an upswing in domestic sales by 11.22%, 6.76% and 719.10% respectively. M&M has been performing well regardless of industry performance and the underperformance of its presence in the segments of medium and heavy commercial vehicles (M&HCV) and two-wheelers. Its robust UV and LCV presence, which contribute to more than 85% of the total volumes, have helped it emerge as a rather strong player. Similar has been the case with the product positioning of Toyota and Renault, the latter specifically due to the tremendous success of its model Duster.

Maruti Suzuki (MSIL) and Hyundai, the two largest car manufacturers in India, posted a decline of 4.29% and 13.46% respectively in their domestic sales volumes. Tata Motors, due to its stale product portfolio and gaps in offerings, witnessed a downfall of 66.62% in passenger vehicle sales in March 2013. At the same time, Tata Motors’ M&HCV sales were down by 32.40% in March 2013 as the company was hit by the overall slump in commercial vehicles.

Similar was the trend with other four-wheeler players. General Motors, Honda and Ford witnessed a decline of 14.94%, 8.82% and 41.61% respectively in the month of March 2013, as compared to the corresponding period in the previous year.

Of the two-wheeler players, Honda was the only player which posted growth in volumes in March 2013 over those seen in March 2012. Hero, Bajaj and TVS announced sales volumes that had declined 11.36%, 10.22% and 8.19% respectively. In fact, the downward sales volume trend witnessed in March 2013 seems to be stronger than that seen in the previous months. The two-wheeler industry, apart from being affected by weak macroeconomic factors, is also facing the trouble of heavy competition.

Overall though, the Indian automobile industry continues to face the trouble of declined demand. Two rate cuts have taken place recently and are expected to ease some pressure off lending rates. High interest rates have been a major contributor to subdued demand, and any easing on this front will be reflected in the sales volumes. Thus, we are of the opinion that the overall trend in the Indian automobile industry will start picking up from Q2FY14.