June 2, 2012: The May 2012 passenger car sales numbers have begun rolling in. If the meagre 3.4 percent overall domestic sales growth in April was any indication, then passenger car sales in May 2012 are a pointer to a slowdown.
A combination of factors – steep petrol prices, high bank interest rates, higher vehicle prices due to rising material and input costs, and a slowing economy – are making consumers wary of putting their money down on new vehicle purchases, particularly petrol-engined models. Companies with a strong diesel-engined portfolio (Maruti, Mahindra & Mahindra and Toyota Kirloskar Motor) have benefited with the shift in consumer preference from petrol to diesel.
Market leader Maruti Suzuki reported a sizeable 4.3 percent fall in its May 2012 sales at 89,478 units (compared to 93,519 units in May 2011). The near 30 percent drop in sales of entry level and only petrol-engined models like the Maruti 800, Alto, A-star and Wagon R (29,895 units sold in May 2012 versus 42,125 units in May 2011) points to a massive shift in consumer’s preference for diesel models in Maruti’s stable.
Hyundai Motor India and Tata Motors recorded marginal growth in May. While the Korean carmaker posted an increase of 2.8 percent (32,010 units), Tata notched a 5.7 percent increase at 20,503 units, propelled by smart sales of the Nano (8,507 units). General Motors (6,079 units) and Ford India (6,036 units) can put down May 2012 as one of their worst months considering their sharp sales declines of 27 percent and 14 percent respectively.
Utility vehicle manufacturer Mahindra & Mahindra with its range of diesel-powered models has been recording good sales in recent times. It sold 21,154 units in May 2012, up 27 percent from the 16,702 units during May 2011. Commenting on the performance, an optimistic Pravin Shah, CEO, Automotive Division, said: “We are happy to have achieved this growth during May 2012 in spite of difficult and uncertain market conditions. All our brands, especially those in the personal category, are doing well. With the planned ramp up of production capacity and the re-opening of bookings of the XUV500 effective June across India, we expect to meet demand from many more of our XUV500 customers.”
The huge petrol-diesel price disparity which has caused the consumer shift to diesel cars clearly is costing the industry dear. Even the Society of Indian Automobile Manufacturers (SIAM) has asked the Union Government to reduce the price differential between petrol and diesel fuels at the earliest to offset the huge imbalance in the car demand pattern after the steep 10 percent petrol price hike on May 23. The industry body has said that while tax reduction on petrol can lower petrol prices, a moderate hike in the administered price of diesel by Rs 2 to 4 per litre can contribute significantly in narrowing the price differential between the two fuels without stoking long-term inflation as well as garner a higher revenue for the Centre.
SIAM has also called for positive policy measures by the Government to render petrol cars more attractive, viable and acceptable to the consumers rather than penalising diesel cars with still higher taxes.
Hero sales keep revving
On the two-wheeler front, Hero MotoCorp continued to make merry despite the overall sluggish market mood. With sales of 556,644 motorcycles and scooters, the two-wheeler giant seems to show no signs of slowing down. It opened fiscal 2012-13 with sales of 551,557 two-wheelers in April 2012 The HMCL management has forecast growth of 9-10 percent for FY13 with volumes of 6.8 million units. Manufacturing capacity is to be increased from 6.6 million units (March 2012) to 7.0 million units (by 2Q FY13).
While number two player Bajaj Auto’s sales numbers are slated to be revealed soon, TVS Motor Co’s May 2012 sales of 173,092 units were a decline of 4.8 percent. Suzuki Motorcycle India reported an increase of 21 percent: 36,746 units, albeit on a small base in May 2011. Honda Motorcycle & Scooter India posted a 52 percent increase with 221,540 units sold in May 2012.
Compared to carmakers, most two-wheeler manufacturers in India are positive about growth and have announced production capacity increases and also new models. And sensing the buyer mood for fuel-efficient motorcycles, some companies have also rolled out a rash of mass-market commuter bikes: Bajaj with its Discover 125 ST, HMSI with its Dream Yuga and Suzuki with its Hayate.