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Passenger vehicle sales growth slows to 8.63% in May

LiveMint logoLiveMint 09-06-2017 Amrit Raj

New Delhi: Sales of passenger vehicles in India rose 8.63% in May from a year earlier, although the pace of growth slowed from the previous month, when sales grew 14.68%, according to data provided by the Society of Indian Automobile Manufacturers (Siam).

Passenger vehicle sales grew to 251,000 units in May from 231,000 units in the year-ago period.

Siam said it was not concerned about the slow growth in May and expected sales to pick up on hopes of good rains in the monsoon season.

The India Meteorological Department (IMD) and private forecaster Skymet have predicted a normal and well-distributed monsoon, which is expected at 98% of the long-period average.

The sales numbers for April and May highlight two broad changes in the world’s fastest growing auto market. First, for the first time Hyundai Motor India Ltd has ceded its position as the nation’s largest exporter of passenger vehicles to Ford India Pvt. Ltd.

Second, Honda Motorcycles, which launched a major sales push in 2011, lagged market leader Hero MotoCorp Ltd by only 136,000 units during the first two months of this fiscal year. The tussle for market leadership in both passenger vehicle exports and domestic two-wheeler sales is likely to intensify in the year ahead.

Ajay Negi/Mint

“Scooters, which were largely an urban phenomenon, have started to sell in semi-urban areas also. This kind of sales is happening largely due to one model (Honda Activa), which is dangerous for the market since this has not been seen anywhere in the world,” said Sugato Sen, deputy director general, Siam.

As much as 66% of Honda’s total sales (1,062,113 units) during April and May came from scooters and a majority of the Honda scooters sold are Activas. On the other hand, Hero continues to dominate the motorcycle market, which has slowed down largely due to tepid growth in the rural economy over the past few years. Of the 1,198,674 units that Hero sold during April-May, only 134,308 were scooters.

A person aware of Hero’s operations said on condition of anonymity that the company was facing supply constraints in certain parts made by a Gurgaon-based supplier.

“Honda’s stated ambition is to go for market leadership. They are going in that direction. It is never easy though,” said Rakesh Batra, partner, EY.

“Going forward, it will be little tougher as they have only ridden the wave of scooters. From now on, the key will be how good their motorcycles are,” Batra said, adding that expectations are that the rural market will revive and “Hero will benefit”.

Sales of two-wheelers grew 11.89%, after months of sluggish growth, to 1.69 million units in May.

On the exports front, Hyundai is no longer India’s largest car exporter as it continues to cut down on production for exports to meet domestic demand. During April-May, it exported 19,867 units, trailing Ford India, which shipped 34,292 units.

Ford, along with Volkswagen India Pvt. Ltd, Nissan India Pvt. Ltd and General Motors India Pvt. Ltd, has tweaked its strategy to focus on exports to make its India business operationally sustainable.

Meanwhile, sales across segments are expected to heat up as the monsoon advances and the goods and services tax (GST) rolls out.

“We feel that if the monsoon is good, we will have good growth and that should also reflect in the sales of two-wheelers and commercial vehicles,” Sen said, adding that several factors have aligned to make the upcoming festive season a good period for the purchase of vehicles.

Sales of commercial vehicles declined 6.36% in May to 53,457 units.

“Commercial vehicles will probably see a short-term impact as freight operators will take time to assess the impact of GST on freight demand,” according to Abdul Majeed, partner and national auto practice leader, PwC. “Until such time they may hold back on the purchase of new vehicles.”

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