Vehicles sales across categories remained lacklustre in January, with passenger vehicle and two-wheeler volumes slipping into negative, while commercial vehicle segment managing a marginal 2% year-on-year (y-o-y) growth.
Passenger vehicle sales declined 1.87% y-o-y in January as dealers could not procure more units from OEMs, due to higher inventory available from the October-December quarter, when festive demand was lower than expected. Analysts at Nomura had pegged a 5% y-o-y fall in volumes, given that consumer sentiment has not yet recovered.
The market sentiment has remained negative for the past few months due to various factors, including hike in fuel price and insurance premium. The mindset change will take at least 3-4 months before we see some revival in the demand, VG Ramakrishnan, managing partner at Aventum Advisors LLP, told FE.
Although wholesales remain weak, retail demand remain robust with passenger vehicles sales growth at 34% month-on-month (m-o-m) in January. The worst hit was the two-wheeler segment, which witnessed a 5.18% y-o-y slump in sale volumes in January, data from Society of India Automobile Manufacturers (SIAM) showed. This was the second consecutive month when the segment reported negative sales as inventory levels continue to remain over six weeks. High dealer inventory build-up is also likely to have dragged down wholesales, in addition to demand issues, analysts at Jefferies said.
Since September 2018, when compulsory five year-third party insurance became effective, two-wheeler sales has slipped into a single digit growth from around 20% earlier, as prices went up substantially. Hero MotoCorp CFO Niranjan Gupta earlier said inventory levels were currently at around six to eight weeks hit by poor rural demand and a subdued festive season. Even the retail volumes rose just 4.25% m-o-m in January.
Commercial vehicle volumes grew by a marginal 2.21% y-o-y last month, but the medium and heavy commercial vehicle remained almost flat, as issues of poor credit availability, higher interest rates and revised axle load norms continued to hamper demand. 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, said Rakesh Batra, national leader-automotive sector, EY India.
Girish Wagh, president-CV business, Tata Motors, said factors like higher interest rates and lagged effect of axle load norms continue to affect the industry. The light commercial vehicle (LCV) segment grew 3.19% y-o-y in January.