Auto sector in slide mode: Sales dip across categories as sentiment stays weak

NEW DELHI | MUMBAI: India’s passenger vehicle sales in July are estimated to have fallen 31%, the sharpest since automakers started reporting the numbers, to around 2 lakh units.

Industry executives said footfalls at dealerships had also started to decline, suggesting extremely weak consumer sentiment. Demand for passenger vehicles tanked across categories and markets last month, they said.

“Unlike the past when the rural market cushioned the urban slowdown or the other way around, this time around the offtake is the weakest across markets,” the owner of a large dealership in western India said. Even generous offers from automakers and dealers failed to attract buyers, he added.


The sharpest fall in passenger vehicle sales previously was 24.6%, recorded in November 2008. Sales have been falling every month for the past year, with an exception of October when the numbers were nearly flat.

Almost all carmakers that reported wholesale numbers on Thursday saw lower sales in July. As many as 10 posted double-digit declines.

The country’s largest carmaker Maruti Suzuki reported a 36.7% fall in domestic sales in the past month at 96,478 units.

Maruti Suzuki chairman RC Bhargava said the exact reason for the prolonged weak demand in the automobile market must be identified, as some other consumer sectors were growing. “It is not true that all sectors are depressed; FMCG sales grew last quarter,” he told ET, adding: “People are just not buying (cars).”

He said: “The election results were positive, the prime minister has come back with a strong mandate, demand should have picked up.” “I do not buy it that the delay in monsoons has affected demand,” Bhargava said. “In the past seven years, there have been good and bad years as far as monsoons are concerned. But that did not impact vehicle sales; auto sales have grown every year.”

According to industry estimates, while the wholesale volume of compact cars fell 26% in July, that of SUVs dropped 9%.

When it comes to absolute numbers, July’s sales of 2 lakh units were the worst since July of 2014, if the numbers for June 2017 were excluded. In June 2017, sales had slipped below 2 lakh units, but that was because of uncertainties around the transition to goods and services tax.

“Never before have we seen such a sharp decline in passenger vehicle sales,” said a senior industry executive, who did not wish to be named. At Mahindra & Mahindra, passenger vehicle sales fell 15% to 16,831units in July. Toyota Kirloskar Motor reported a 24% fall in local sales at 10,423 units, while Honda Cars India posted a 48.7% drop to 10,250 units.

Rajesh Goel, a senior vice-president at Honda Cars India, said: “The de-growth in the automobile industry further intensified last month amid weak buying sentiment and overall slowdown. We are witnessing a lot of postponement of purchases.” The situation has made industry players urge the government for some stimuli to revive demand.

Veejay Ram Nakra, the chief of sales and marketing (automotive division) at Mahindra & Mahindra, said: “The industry needs stimuli to help revive consumer demand and conversions. We hope that the overall buying sentiment will improve in the run-up to the festive season and with the monsoon turning out to be better than initially anticipated.”

N Raja, the deputy managing director at Toyota Kirloskar Motor, said he hoped the upcoming festive season to bring in some breather for the industry. “Also, we expect government will step in to take necessary steps for improving liquidity in the market …The industry also expects the GST level to be rationalised to a lower level (from 28% to 18%) to accommodate the downturn in sales,” he added.

While Raja seemed to be optimistic, Maruti Suzuki is cautious about pushing inventory at dealerships ahead of the festivals.

Executive director RS Kalsi told analysts at a recent earnings conference: “We don’t see any positive signal in the marketplace that will give a sense of optimism in the future. We will wait and watch.”

Unnecessarily loading inventory with stock in these difficult times does not make sense, he had said, while adding that if there was an increase in demand, “we will react” as the company’s production system was flexible.