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Maruti sales decline as car market sees slowest growth in 4 years

FE Bureau

Passenger vehicle sales continued to remain in the slow lane in March a trend intact for the past nine months with the country s top five manufacturers on Monday reporting either a decline or a low single-digit growth. As a result, FY19 would see one of the slowest growth at around 4% in the last four years. last time PV sales had hit a low of 3.9% was in FY15.

The final growth figure for the fiscal will thus be lower than the industry body Society of Indian Automobile Manufacturers (SIAM) revised figure of 6%. During the beginning of the fiscal year 2019, SIAM had projected a growth of around 10% for PVs, which it revised downwards after October 2018.

Maruti Suzuki, the country s largest PV manufacturer with a 51% market share, posted a 0.7% y-o-y decline in its domestic sales in March and a 6.1% rise in volumes during FY19, much lower than the 10% the company had pegged during the first quarter of FY19.

Maruti Suzuki chairman RC Bhargava told a business news channel that going by past trends, sales should pick up post the general elections, but since this month onwards new safety norms like ABS will lead to increase in prices, but he was keeping his fingers crossed. Evidence of the past general elections show that in the year before the elections, sales slow down considerably. However, sales usually pick up post general elections. In 2009-10, growth was almost 20% post the elections, in 2014-15, it was 12%. Whether that is going to get repeated this year or not is a big question and all of us are keeping our fingers crossed, Bhargava told CNBC TV18.

Maruti Suzuki, the country s second largest PV manufacturer with a market share of nearly 17%, reported a 7.6% y-o-y decline in domestic volumes while Toyota managed a 2% y-o-y growth in March. Tata Motors reported a 12% y-o-y fall in PV sales in March while Mahindra & Mahindra reported a 4% y-o-y rise in sales backed by three new product launches during the month. Honda Cars remained an exception by recording a 27% y-o-y growth in March on the back of low base coupled with launches of new variants of the Amaze and the Civic.

Consumer spending has weakened in the pre-election phase and the business sentiments have dampened temporarily, said N Raja, deputy MD at Toyota Kirloskar Motor.

PV sales in the April-June quarter had clocked a 20% y-o-y growth, but the trend has reversed thereafter. During July-September, volumes fell by around 3% y-o-y due to Kerela floods and the base effect as in the second quarter of FY18, volumes had shot up post the rollout of GST when companies re-stocked. Post September, volumes remained sluggish as new insurance regulations raised premiums by over two-fold and finance became costlier.

The commercial vehicle (CV) segment also saw companies registering negative sales, with the management attributing this to liquidity tightening, higher interest rates and revised axle load norms. While Ashok Leyland s volumes fell 5% y-o-y in March, M&M reported a 4% y-o-y decline in volumes. Tata Motors recorded a 4% y-o-y growth last month.

After around seven months of growth in FY19, CV volumes started dwindling since 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. Analysts had expected that since inventory levels were still high at around 40 days, wholesales would also remain muted.

Fleet operators have been holding back new purchases due to continued impact on their profitability, arising out of concerns such as price increase and revised axle load norms, which has now started having impact, according to Rakesh Batra, national leader, automotive sector at EY India.