Maruti Suzuki and M&M See Poor Auto Sales Numbers For December 2013

Continuing with the sluggish demand by customers in the auto sector, the auto sales numbers for December 2013 have declined once again on a month-to-month basis. 

Market leader in cars, Maruti Suzuki India (MSIL), saw its total domestic sales remain almost flat at 86613 against 85510 in November 2013, while its Passenger vehicle sales rose by 2% to touch 73155. Sales of Utility Vehicles dropped by 12% to 5146 in this period. 

The decline in the company's total sales number is primarily on account of the decline in export sales figure, which dropped by 39 % to 4311 on a sequential basis. For 9MFY14, the company has posted a growth of just 1.7% and sales stood at 755093 on a YoY basis.

Mahindra & Mahindra (M&M) also reported a decline in domestic tractor sales by 26% to 13712, whereas its 9MFY14 sales grew by 22% to 212260. Other than tractors, the company's domestic sales volumes remained almost unchanged at 36881 for the December, whereas for 9MFY14, it shrank by 10% to 349365 on a yearly basis. Exports of the company’s vehicles reduced by 9% MoM, while for 9MFY14 it declined by 13.6% to 21324.

The Auto sector has been affected by factors like high interest rates and a consistent increase in fuel prices, which have added up to afflict the sector during CY13. As the numbers indicate, both MSIL and M&M have faced weakness in their sales volumes.

Despite this weakness, however, MSIL and M&M saw their stock prices rise during the fiscal,  giving returns of about 18% and 2.5% respectively in the past one year (CY13). While M&M’s stock price saw a marginal rise and has underperformed the frontline indices in CY13, MSIL outperformed the bellwether indices. This was largely due to a 7.5% depreciation in the Japanese Yen (JPY), as royalty payments (comprising around 6% of sales) and component imports (comprising around 20% of sales) are Yen-denominated. Thus, the fall in value of the JPY helped MSIL to see better margins.

For the current year 2014, both MSIL and M&M are likely to increase the prices of their various models due to rise in input prices. This will again disappoint their customers, which can affect the whole Auto sector for CY14 too. Nevertheless, there are macro-economic factors other than price that impact the demand of auto, which if improves in CY14 will help companies to post better numbers.