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Passenger vehicle sales pick up after 9 months

LiveMint logoLiveMint 10-06-2014 Amrit Raj

New Delhi: Combined sales of cars, utility vehicles and vans rose in May for the first time in nine months, raising hopes of a recovery in a market buffeted by a prolonged slowdown.

Auto makers sold 207,000 passenger vehicles, 2.76% higher than a year ago. The last time such sales grew was in August, when they were lifted by a 61% growth posted by market leader Maruti Suzuki India Ltd, whose sales growth was due to a low base in August 2012, when production stopped at its Manesar factory in Haryana.

Ahmed Raza Khan/Mint

“If you don’t take August sales into account, this growth has come after 15-16 months,” said Vishnu Mathur, director-general of industry lobby group Society of Indian Automobile Manufacturers (Siam). “I know I’m technically wrong, but I would like to believe that we have grown for the first time since December 2012.”

India may have put the worst behind as far as passenger vehicle sales are concerned, he said.

In May, car sales grew 3.08% to 148,000 units, while two-wheeler sales grew 16.30% to 1.4 million units on the back of a robust demand for scooters.

However, sales of trucks and buses declined 15.28%, which indicates sluggish economic activity. The combined sales of all vehicles grew 13.22% to 16.98 million.

Mathur credited the improved sentiment and a cut in excise duty in the interim budget in February for the better show.

“Excise duty cuts have helped bring down ownership costs, even though interest rates and fuel prices have been on the higher side,” he said. “The improved sentiment has instilled confidence in buyers and we believe passenger car sales will pick up from here.”

The improved performance may not denote a recovery, some experts said.

“All this is due to the low base effect,” an executive at a auto firm said on condition that neither he nor his firm be named. “There ain’t any green shoots.”

“The industry wants to convey it to the government that excise cuts have started to show impact,” he said, adding that the sector wants the sops to continue.

The executive ruled out any immediate buoyancy after the change in guard at the centre. Manufacturing is expected to play a key role in the new government’s endeavours to achieve higher growth.

The auto industry has slowed in the past two years, with sales slowing by 3.53% to 18.4 million vehicles in the fiscal ended 31 March. Sales of passenger vehicles saw their first decline during the period, with 2.5 million units being sold, a decline of 6% over a year ago.

There isn’t any changed mood in the market, according to Nikunj Sanghi, past president of the Federation of Automobile Dealers Association, who runs dealer franchises of Mahindra and Mahindra Ltd and Hero MotoCorp Ltd in Rajasthan. “I hope to see the feel-good factor translate into actual retail sales,” Sanghi said over phone last week. “It has not happened yet.”

India’s economy has not shown any signs of improvement and the monsoon rainfall could be deficient, the India Meteorological Department has predicted, which is likely to affect demand. The government is preparing contingency plans for a poor monsoon, President Pranab Mukherjee told a joint session of Parliament on Monday. India received adequate rainfall last year.

Pretika Khanna contributed to the story.

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