Price hikes, rising fuel rates slow September auto sales

Local sales at passenger vehicle makers grew at a slow pace or even fell in September, weighed by rising fuel cost, higher insurance premiums and recent price hikes by automobile companies.

Commercial vehicle sales continued to expand, thanks to a low base to compare with, but industry executives said rising fuel price is the matter of concern in this segment as well. In two-wheelers, growth slowed down, primarily because of the increased insurance cost.

Maruti Suzuki, which makes more than half the cars sold in the country, posted a tepid 0.7% increase in September local sales compared with a year earlier, while at No.2 Hyundai Motor, India volume fell 4.5%. Tata Motors reported a 7% increase, but at home-grown rival Mahindra & Mahindra, sales fell 16%.


In the past six months, the price of petrol has increased 14% and that of diesel 17%, according to the Petroleum Planning & Analysis Cell. While this has increased the running cost of vehicles, a Supreme Court order mandating long-term insurance cover has increased the ownership cost. Both factors, said industry executives, led to the subdued demand.

“There is an impact of an additional Rs 8,000-9,000 on a two-wheeler insurance premium for an entry-level motorcycle,” said Nikunj Sanghi, director of international affairs at the Federation of Automotive Dealers Associations. “Moreover, this amount cannot be financed and adds up to the down payment of the two-wheelers,” he said. “This festival is going to be a challenge. Inventory levels have been pushed to a level which cannot be imagined in September.”

In the PVs, too, high inventory levels seem to be a concern ahead of the festival season. Sales had fallen in the previous two months as well in the segment. Maruti, to push the stock at dealers, is giving discounts and benefits of Rs 10,000-15,000 on its top-selling models like the Baleno, Swift and Dzire.

Tata Motors posted higher sales for the third straight month in its PV business, but the pace has slowed for the company as well.

"The growth for the overall PV industry is stressed with degrowth in all three months of the quarter. Early indications have been that the Industry has declined in September this year,” Mayank Pareek, president of the passenger vehicles business unit at Tata Motors said, while noting that demand of its new-generation vehicles had helped it buck the trend. “We expect sales to pick up this festive season and to boost our customer morale, we are bringing four new products to market," he said.

MIXED BAG FOR TWO-WHEELERS

In two-wheelers, the need to pay for longer insurance cover damped demand, though widespread rainfall and rising rural demand have helped the segment grow marginally.

At market leader Hero MotoCorp, total sales rose 6.75%. At Bajaj Auto, sales in the past month were the highest ever at 502,009 units.

In the commercial vehicle space, Tata Motors, Ashok Leyland and Mahindra posted sales growth of between 19% and 26% in September.