Sales Analysis of Indian domestic auto industry June 2019

Paucity in demand resulting in rising inventory level has forced OEMs to arrange for plant shutdowns and production cuts in May and June

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The Indian automobile market is going through a rough patch of demand distress. Almost all the auto manufacturers witnessed a drop in sales owing to weak consumer sentiments across all segments in June 2019.

Low consumer sentiments are a result of hike in vehicle prices amid strict safety regulations and persisting impact of recently launched axle norms, restricted currency circulation and poor performance of core sectors such as infrastructure and mining, delay in monsoon is another reason. These factors have pulled down demand in the entire country.

Because of shortage in demand, dealership of the automakers is paucity with unsold inventory that forced big OEMs to put their production work at a halt for a minimum of 7 days during the month of May and June.

Only newly launched models are getting some positive responses from the customer, a report by Nirmal Bang a brokerage consultancy firm says. Retail sales continue to drop, restricting few OEMs, rest continue with their regular manufacturing schedules as they cannot afford to have the unsold inventory of BS-IV vehicles.

BS or Bharat Stage is a standard instituted by the government to regulate the emission of air pollutants from motor vehicles.

Till now we have talked about the drop in demand in compared to last year now in terms of monthly performance, only Mahindra & Mahindra’s(M&M) passenger vehicle segment witnessed a positive sales trend of 4 percent growth in the month of June 2019.

India’s largest carmaker, Maruti Suzuki India Limited (MSIL) recorded double-digit drop for a third consecutive time in an ongoing financial year.OEM of popular models like Swift Dzire and Baleno has reported a 16.7 percent drop in domestic sales at 113,031 units in June 2019 compared to 135,662 units in June 2018.

Experts say that demand will show some positivity from the upcoming festive season when OEMs will introduce discounts

OEMs June 2019 June 2018 % Change
Passenger Vehicle
Maruti Suzuki 113,031 135,662 – 16.68
Hyundai India 42,007 45,314 – 7.30
Mahindra & Mahindra 18,826 18,137 3.80
Toyota 10,603 13,088 – 18.99
Tata Motors 13,351 18,213 -27
Honda Cars India 10,314 17,602 -41
Commercial Vehicle
Tata Motors 35,722 38,560 -7
Mahindra & Mahindra 16,394 19,229 – 14.74
Ashok Leyland 12,810 15,792 – 18.88
VECV 4,569 6,390 – 28.50
Two Wheeler
Bajaj Auto 229,225 234,576 – 2.28
TVS Motor 226,279 246,176 -8.08

Passenger Vehicle Sales: Downward sloping for the 8th month in a row

Indian automobile industry recorded a double-digit decline for three consecutive months. This may be also the worst quarter in term of sales, Indian automobile have ever witnessed.

Just like leading carmaker MSIL, the second largest carmaker HMIL also posted a decline of 7.3 percent in domestic sales in the month of June 2019. It recorded a sale of total 42,007 units in the month of June 2019.

Mahindra & Mahindra is the only company that proved their metal, witnessed a growth of 8% over June 2018 in the utility vehicles segment.

The Passenger Vehicles segment sold 18,826 vehicles in June 2019 recorded a growth of 4 percent.

On the other hand, other OEMs like Toyota Kirloskar Motor, Tata Motors and Japanese carmaker, Honda Cars India Ltd. (HCIL) all recorded double-digit decline in their sales.

Toyota Kirloskar Motor posted a decline of 19 percent in domestic sales of June 2019. The carmaker which recently launched compact hatchback Glanza sold 10,603 units in the month of June compared to 13,088 units in the same month last year. 

Similarly, Tata Motors passenger vehicle segment has seen a drop of 27 percent at 13,351 units in June 2019 as compared to 18,213 units in June 2018, due to low consumer sentiments. The company mentioned that the industry continued to remain stressed; however, the market is expected to bounce back.
Japanese carmaker, Honda Cars India Ltd. (HCIL) domestic sales declined by 41.4 percent at 10,314 units in June 2019 when compared to 17,602 units sold in June 2018

Commercial Vehicles are floating too

In the Commercial Vehicles segment, India’s largest commercial vehicle manufacturer Tata Motors witnessed a fall of 7 percent at 35,722 units over a year. This is because customers are postponing purchases due to the poor freight availability, the falling freight rates affecting their ability, the company said in a statement.

Similarly, Mahindra & Mahindra sold 16,394 vehicles in June 2019, posting a decline of 9 percent in comparison to its last year sale of 19,229 vehicles.

In the Medium and Heavy Commercial Vehicles segment, M&M sold 705 vehicles for the month. Exports for June 2019 stood at 3,076 vehicles.

Sruthi Thomas, Senior Analyst, ICRA Ratings, “The road transportation sector is currently facing over-capacity, partially contributed by a revision in load carrying norms in July 2018, which resulted in a 15-20% increase in capacity of CV parc, and partially by GST implementation and the resultant improvement in turnaround time. Furthermore, the strong growth in CV sales over the past two years outpaced the underlying freight generation, leading to surplus capacity.”

In addition to the impact of revised axle load norms, the impact of the slowing economy and tight liquidity in the NBFC space is also contributing to weak sales.

“With the slowing economic growth and flat freight rates, the earnings of fleet operators have come under pressure in recent months. This, coupled with the ongoing liquidity crisis in the NBFC sector, has turned financiers cautious on lending to the goods carrier segment, thereby impacting their financing avenues,” added Thomas.
Ashok Leyland, a Chennai-based commercial vehicle company has shown a similar trend. The company has reported a 19 percent decline in total sales at 12,810 units in June 2019 as against 15,792 units in the corresponding month last year, as per a regulatory filing.

Sales of medium & heavy commercial vehicles (M&HCV) fell by 25 percent at 8,427 units last month as compared to 11,258 units in June 2018. 

Company light commercial vehicles sales which showed a vigorous growth in previous months declined by 3 percent at 4,383 units in June 2019 as against 4518 units in June 2018.
In the domestic market, the company sold a total of 12,085 units last month, down 14 percent, as against 14,091 units in the same month a year ago. 
Volvo Eicher Commercial Vehicles (VECV) posted 28.5% declines in total sales at 4,569 units for the month of June.

Two-wheeler sales hit the jolty road

Pune and Chennai based two-wheeler manufactures Bajaj Auto and TVS Motors posted a drop of 2 percent and 8 percent respectively.

Bajaj Auto witnessed sales of 229,225 units in June 2019 as against 234,576 units in June 2018.

TVS Motor posted a drop of 8 percent in the domestic market at 226,279 units last month as against sales of 246,176 units in June 2018.

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