Yet Another Month Of Poor Auto Sales

Indian automobile manufacturers have posted a set of disappointing sales numbers for yet another month. For over a year now, the industry’s performance on the volumes front has been hurt on account of weak consumer sentiment and low industrial activity. Structural issues of high inflation and high interest rates also continue to hamper the performance of the industry.

India’s largest car manufacturer, Maruti Suzuki (MSIL) had its sales grow by a moderate 1.30%. While its domestic sales grew by 5.80% in July 2013, a 27.26% decline in exports weighed down the overall sales figures. The Mini segment (M800, Alto, A-Star and Wagon R), Super Compact segment (DZire) and Vans (Omni and Eeco) all saw good growth. Sales in the other segments, though, were subdued.

Tata Motors continued to post dismal figures. A stale product portfolio with gaps in it resulted in a decline of 58.75% in passenger vehicle sales. Those of Light Commercial Vehicles (LCVs) and Medium and Heavy Commercial Vehicles (M&HCVs) dropped by 10.11% and 23.68% respectively. Exports too fell by 12.07%. This caused the overall sales volumes to come in 29.97% lower.

Mahindra & Mahindra (M&M) had been a consistent performer so far in the listed space. Its success was driven by robust volumes in its Utility Vehicle (UV) segment. However, in July 2013, its UV and passenger car sales declined by 29.44%. Weakness was also seen in the sales of LCVs and three-wheelers, which went down by 6.45% and 12.80% respectively. The company’s exports fell by a massive 38.83%. This led to the overall volumes declining by 21.17%. However, M&M’s tractor sales have been robust on account of a good monsoon, growing by 11.79% in July.

Among unlisted four-wheeler manufacturers, the only companies to post robust numbers were the ones that saw model-specific success. Sales of Honda grew by 2.5x, Renault by 2x and those of Ford were 26.15% higher. For these three companies, the success of Amaze, Duster and EcoSport respectively helped propel the sales volumes. The rest continued to struggle in the current environment. There was a decline in the sales volumes of companies like Hyundai (7.84%), Toyota (20.98%), General Motors (10.73%) and Volkswagen (11.53%).

The trend remained subdued in the case of two-wheelers as well. Hero MotoCorp’s volume growth was flat at 0.69%, as the company sold 487545 vehicles in July. However, the month saw some developments on the company front that make the case stronger for Hero’s long-term prospects. The company announced an acquisition of 49.2% stake in Erik Buell Racing and also launched its vehicles in the international markets of Kenya, Burkina Faso and Ivory Coast.

Bajaj Auto (BAL) was hit considerably as the market for premium motorcycles in India declined. The company’s domestic sales declined by 21.65% and exports by 12.33%. Its motorcycle sales declined by 20.08% in July 2013 and three-wheeler sales were down 2.25%.

TVS Motor’s total sales declined by 4.70% in July 2013. It saw growth of 8.49% in motorcycle sales, 112.21% growth in three-wheeler sales and 36.58% growth in exports. However, weakness in moped sales and a 9.77% decline in scooter sales resulted in overall weakness.

Among unlisted two-wheeler players, though, the strong upward trend continued. Honda’s sales grew by 20.11% and those of Yamaha by 35%.

Overall, the industry sales continue to remain weak. Only structural improvement can be expected to help the industry. As the monsoon has been good so far, we expect rural demand to pick up by the festive season and lend some support to the auto industry.

Note: All sales volume figures are for the month of July 2013. Comparison of these figures is being made with sales volume figures observed in the month of July 2012, on a yearly basis, in all cases.