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Sales of cars didn’t pick up for the fifth straight month and heavy truck volumes declined as November turned out to be a lacklustre festive month because of higher costs and financing crunch.
Rising fuel prices and upfront insurance costs stemming from mandatory multi-year third-party cover hurt demand for passenger vehicles, according to multiple brokerages including Jefferies and IIFL Institutional Equities. Sales, including for India’s largest carmaker Maruti Suzuki India Ltd., have remained flat since July, Jefferies noted.
Maruti Suzuki’s small-car volumes declined 22 percent year-on-year in November, which were partly offset by 11 percent growth in the compact category, the company said in its filing. Overall, November was stagnant compared with a 7 percent growth so far this year.
Weak car sales came in a festival month that’s considered auspicious for buying. “The festive season was the worst in the last five years,” Saharsh Damani, chief executive officer of Federation of Automobile Dealers Association, had told BloombergQuint in an interview. That pushed up inventory levels at dealerships. December offers little hope as it usually is a subdued month with buyers putting off new purchases till the new year.
Financing Woes Hurt Heavy Truck Sales
Demand for heavy trucks declined partly because of lack of finance as non-bank lenders, which usually lend to buy commercial vehicles, face a credit crunch, Tata Motors Ltd. said in its statement. Higher rates and rising fuel costs weighed on the sentiment.
Industry-wide sales of large trucks declined 19 percent year-on-year in November compared with an annualised growth of 4 percent in the last two financial years.
For Tata Motors, heavy commercial vehicle sales fell 24 percent compared with a 36 percent growth so far this year, according to Jefferies. Ashok Leyland Ltd.’s heavy truck volumes declined 18 percent compared with a 23 percent year-to-date growth.
“Overall auto outlook remains challenging, given the lower consumer sentiment, rise in vehicles prices and financing issues,” Joseph George, auto analyst at IIFL Institutional Equities, wrote in a note.
Tractors Retain Momentum
Sales of light trucks and two-wheelers rose in November. But they grew at a slower pace than the annualised growth in the last two years.
Hero MotoCorp Ltd.’s sales continued to slow down, remaining largely unchanged in November compared with a two-year annualised growth of 13 percent. Eicher Motors Ltd. felt the impact of the strike at its Chennai plant.
Tractor sales maintained the momentum, indicating sustained rural demand.
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