Indian auto industry flatlines in '08-'09

Passenger vehicle sales remained practically flat, recording a meagre 0.13 percent growth over the previous year. Within this segment, passenger cars and multi-purpose vehicles grew by just 1.31 percent and 5.69 percent respectively during 2008-09. However, sales of utility vehicles actually declined 7.94 percent. During the month of March itself, passenger vehicle sales dropped 1.15 percent over the same period last year.

The segment that was hardest hit by the slowdown was commercial vehicles, with truck and bus sales dropping a massive 21.69 percent during 2008-09 over the same period last year. Medium and heavy commercial vehicles declined by an even larger 33.16 percent, while the decline was less severe for light commercial vehicles, which dropped 7.10 percent. In March 2009, commercial vehicle sales fell a substantial 26.22 percent compared to March 2008, with medium and heavy CVs dropping 43.40 percent and LCVs falling just 0.17 percent. Also, medium and heavy buses grew by a marginal 0.57 percent and light buses dropped 6.72 percent. Three-wheeler sales fell by 4.13 percent during the previous fiscal year, while passenger carriers grew a solid 14.36 percent during 2008-09. Goods carriers declined a massive 37.52 percent due to the slowdown in economic activity. In March this year, three-wheeler sales actually grew by 11.40 percent over the same month last year.

Two-wheeler sales also came under intense pressure in the last financial year due to the sudden slowdown in lending to this segment by big private finance companies. This, coupled with weak consumer sentiment, has seen the segment report a meagre 2.60 percent growth during 2008-09. While mopeds and scooters grew by 4.22 percent and 9.11 percent respectively, motorcycle sales were particularly badly hit, growing just 1.16 percent. Electric two-wheelers grew by 49.48 percent, albeit from a relatively smaller base. During March 2009, two-wheeler sales grew at a sluggish 3.65 percent over the same month last year, indicating that a sustained recovery is still sometime away.

Export of automobiles during 2008-09 grew strongly, showing an increase of 23.61 percent, with all segments recording increases, except for commercial vehicles which were affected due to the global economic slowdown. The export of passenger vehicles and two-wheelers grew 53.73 percent and 22.50 percent respectively, while three-wheeler exports grew 4.85 percent. However, exports of trucks and buses declined by 27.67 percent during this period.

According to Tata Motors, its domestic sales for March 2009 were 52,686 units while total sales (including exports) were 54,485 vehicles. For the entire financial year ended March 2009, total sales were 498,581, which are 14 percent lower than the 582,390 units sold in the previous fiscal. The company believes that the financial stimulus packages announced by the government, particularly for commercial vehicles, have had a positive impact. However, it feels that the demand for trucks at the retail level would still take some time to reach levels from the last fiscal. As a result, its March 2009 domestic sales were 13 percent lower than those of March 2008.

Meanwhile, Mahindra said it sold 25,748 units in March 2009 in the domestic market, its highest ever monthly sales figures. This compares with the 23,128 units sold in March 2008, a solid 30 percent increase in sales for the company’s utility vehicles. This includes the highest ever monthly sales for the Scorpio, Bolero and the Pik-Up models, which stood at 19,973 units for March 2009 as against 15,366 units for the same period last year. The newly launched Xylo multi-purpose vehicle also sold strongly with 3,124 units finding buyers in the Indian market. According to Anand Mahindra, vice-chairman and managing director, Mahindra & Mahindra, “This is a clear validation of the faith reposed in our products by customers. I am especially pleased that our new Mahindra Xylo has changed the rules of the game with impressive sales figures.” The Bolero model has also done very well for the company, selling a record 55,924 units in 2008-09. According to Mahindra, this makes the Bolero the first brand in the SUV/ UV/ MPV segments to cross 50,000 units for two consecutive years.

Hyundai Motor India registered a 1.8 percent decline in cumulative sales during March 2009. While its domestic sales dropped 15.8 percent, exports grew by 21.6 percent, thanks to higher exports of i10 and i20 models to Europe. Total March 2009 sales were 46,160 units against 47,001 units in March 2008. The Indian market accounted for 24,754 units compared to 29,401 units for the same month last year, while the exports totaled 21,406 units in March, 2009 against 17,600 units of March, 2008.

According to Arvind Saxena, senior vice- president - Marketing and Sales, “As we have stated earlier, the industry is far from seeing a turnaround at this moment. If we look at the February and March 2009 sales combined and compare them to 2008 for the same period, then we have registered a growth of 4.5 percent, whereas March 2009 sales over February 2009 have grown by 16.7 percent.” Maruti also claimed a sales record in March 2009 with its Alto model reporting its highest ever monthly sales of 23,569 units, a jump of 20.98 percent over the corresponding period last year.

Honda has also reported strong numbers, thanks to the overwhelming popularity of its New City, which sold 6,040 units during March 2009. This is a particularly remarkable feat, given the difficult market conditions prevailing at the current time. Total sales for the Japanese carmaker during the month grew 32 percent with 7,368 units being sold in March 2009 against 5,579 units sold in February 2009. SIAM has projected that Indian passenger car sales during 2009-10 would grow around five percent, driven by demand from rural and semi-urban markets. Commercial vehicle sales are estimated to rise by as much as seven to 10 percent during the current fiscal, while two-wheelers are expected to grow by five percent in 2009-10, thanks to the growth in credit availability. Growth in demand for passenger vehicles would, according to SIAM, be driven by the availability of several new small cars including the Tata Nano, Maruti Ritz, Honda Jazz and VW Polo. Other positives for the sector are the upcoming vehicle repossession guidelines from the Reserve Bank of India and falling interest rates.

Sales of commercial vehicles will start picking up this year, due to the extension of the 50 percent depreciation benefit given to truck owners from March '09 to June '09. Increased infrastructure spending by the government should also give a boost to vehicle demand in 2009-10. The growth in light commercial vehicles like the Tata Ace is also expected to continue. Some carmakers, however, disagree with these projections saying that they are overly optimistic. They feel its still a bit early to project sales growth rates for the entire year. Given the current scenario, they expect to maintain the same sales volumes during April to June 2009, compared to the same period last year.

Clearly, the previous year has been an extremely challenging one for the entire Indian auto sector and their expectation and hope is that things would improve this year.