Impacted by shutdowns at some plants and little consumer interest, wholesale despatches of passenger vehicles (PVs) were down by over 15 per cent year-on-year (y-o-y) in June the 12th consecutive month of subdued numbers. Despite the shutdowns, however, inventory stayed at levels that were higher than the normal 20-30 days with companies struggling to stimulate demand.
Analysts said weak retail demand and inventory correction affected carmakers wholesale despatches to dealers. Besides, the rise in vehicle prices due to regulatory changes and higher financing costs are likely to hit car sales for a few more months till the festive season. It s a grim volume scenario at present partly due to a weak model launch phase, analysts at Axis Capital said.
While Maruti Suzuki had its annual maintenance shutdown of seven days in June, others, including Tata Motors and Mahindra & Mahindra (M&M), left their plants shut for three-nine days to reduce unsold inventory piled up from the 2018 festive season, when demand was weaker than expected due to a hike in insurance premiums and costlier finance.
Maruti s domestic volumes in June fell 15.3 per cent y-o-y, while Hyundai s volumes were down 7.3 per cent. M&M was the only manufacturer to buck the trend by registering a 4 per cent y-o-y growth in June, on the back of new launches like XUV300. Tata Motors posted a sharp 27 per cent y-o-y dip in PV wholesales.
Maruti Suzuki chairman RC Bhargava earlier said loans have become more expensive since the second half of the previous fiscal, which might continue impacting consumers for the next few months. With the RBI easing interest rates, I hope the banks will pass on the benefits to customers in the next few months, which may help in inventory easing out, Bhargava had said.
N Raja, deputy MD, Toyota Kirloskar Motor, said slowdown in domestic sales had been a result of several factors. The prevailing economic uncertainty, uncertainty on monsoons, high interest costs, tight liquidity and also the underlying apprehensions surrounding BS VI introduction in few months have steered the slowdown, Raja said.
Demand for two-wheeler also saw a trend similar to PVs, remaining lacklustre for the eighth consecutive month in June.
Among two-wheelers, Hero MotoCorp s sales dropped 12 per cent y-o-y, while TVS Motor s domestic sales dipped 8 per cent. Volumes of Royal Enfield, meanwhile, fell 24 per cent. Bajaj Auto performed relatively better, with domestic two-wheeler volumes falling 1 per cent y-o-y in June.
Demand for two-wheelers was impacted by a rise in insurance premium in September 2018 and subsequent price hikes effected by companies on April 1, as they had to add several features to the vehicles to comply with the new safety norms.
Wholesales of commercial vehicles (CVs) too fell nearly 12 per cent y-o-y in June, with the management of major companies attributing the slowdown in demand to a halt in several infrastructure projects and the revised axle load norms. Ashok Leyland s domestic sales fell 14 per cent y-o-y, while Tata Motors and M&M posted a fall of 7 per cent and 15 per cent y-o-y, respectively.
Both M&HCV and SCV segments have been hit by poor consumer sentiment, falling freight rates and difficulty of funding by NBFCs, said Girish Wagh, president, CV business, Tata Motors.
After around seven months of growth in FY19, CV volumes began dwindling from November 2018. 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. FE