Falling for the eighth successive month, passenger vehicle (PV) sales dropped 17.54% year-on-year in June as manufacturers slashed production owing to poor demand and higher inventory pile-up at dealerships. Carmakers dispatched a total of 225,732 vehicles in June 2019 to their dealerships compared with 273,748 during June last year, according to data released by Society of Indian Automobile Manufacturers (Siam) on Wednesday. The last time PV sales grew was in the month of October 2018, at 1.5% y-o-y. Since then monthly sales for carmakers have slumped owing to hike in insurance premium and costlier finance. Analysts expect volumes to be subdued owing to selective financing by NBFCs, increase in vehicle prices on account of BS-VI norms and weaker consumer sentiment. “FY20 could be a challenging year for the sector due to transition to BS-VI norms from April 1, 2020,” analysts at Kotak Institutional Equities recently noted. Automakers, including Maruti Suzuki, Tata Motors, Mahindra& Mahindra (M&M) had cut production by shutting down plants during the April-June period for around 4-10 days in order to reduce unsold inventory. All manufacturers except M&M reported a decline in June sales with the likes of Maruti Suzuki, Hyundai Motors and Tata Motors pulling the numbers down significantly. M&M clocked 4% more sales in June 2019 compared with June 2018, predominantly driven by utility vehicles like Mahindra Marrazo. Siam president Rajan Wadhera warned that this prolonged slump in domestic sales could force automakers to downsize staff and hurt future investments. “This is the worst slump in auto sales ever. Earlier, the slowdown in sales was restricted to one or two categories. Hiring is already frozen in the auto industry. We are staring at job losses if the situation persists,” he told reporters. However, some analysts are hoping for recovery in PV sales during the festive season. “The wholesale dispatches are likely to remain weak for the next 1-2 months and we expect some signs of recovery from the festive season. The government’s push to recapitalise banks and improve liquidity in NBFCs is positive for the economy, benefits of which will start reflecting in the next few quarters,” Ashish Modani, vice-president & co-head, corporate ratings, Icra, pointed out. Two-wheeler demand remained subdued in June, falling 11.69% y-o-y. Hero MotoCorp, Honda Motorcycle and Scooter India and TVS Motors dragged down the domestic sales steeply. Demand was impacted by a hike in insurance premium in September 2018 and subsequent price hikes taken by companies on account of new safety norms. Manufacturers increased prices in the range of Rs 500-7,000 as they rolled out products with combined braking system (CBS) and anti-lock braking system (ABS) feature, mandatory for vehicles sold from April 1. “Hero MotoCorp reported a 12.5% y-o-y decline, below our estimate of an 11% decline. Retails also remained weak and inventory remains elevated at 6.5-7 weeks,” analysts at Nomura wrote. Wholesale numbers for commercial vehicles also fell in June by 12.2% y-o-y. The government last year hiked the loading limit for CVs, as a result of which fleet operators got more bandwidth to load goods and new purchases are getting postponed. Tata Motors indicated that poor freight availability, falling freight rates and slowdown in infrastructure projects impacted demand. Analysts expect some improvement in CV sales from Q3FY20 due to pre-buying ahead of introduction of BS VI norms.