Numbers and statistics often portray a larger-than-life image. But that could be a temporary effect like it is with the November 2017 sales numbers in the domestic market. After witnessing a sharp setback in November 2016, when the government’s demonetisation drive kicked off and went on to impact overall industry as well as the economy, vehicle sales a year later have shown a marked improvement, albeit relative to the notably low year-ago base.

Total vehicle sales across segments in November 2017 fell slightly short of the two-million mark at 1,939,671 units (+24.05%) with passenger vehicles (275,417 / +14.29%), commercial vehicles (68,846 / +50.43%), three-wheelers (60,131 / +78.63%) and two-wheelers (1,535,277 / +23.49%) all recording double-digit growth. Nonetheless, cumulative sales for the April-November 2017 period point to robust 9.29 year-on-year growth. With four months of the fiscal remaining, the country’s economic indices improving and consumer sentiment on the upswing, the industry looks set to notch its best performance since the heady FY2011 when it notched 27 percent growth and 12.24 percent in FY2012. Since then, though, it has been single-digit growth right till FY2017.

According to Vishnu Mathur, director general, SIAM, “What we see in November 2017 are pretty good numbers, with all segments registering strong growth. But, when compared to last year, firstly, both Diwali and Dussehra fell in October 2016, which exhausted inventories and brought in scope for more production in November. However, immediately getting hit by the government’s demonetisation drive in the first week of the month itself, impacted business across the entire automobile industry and pulled down sales in various key segments.”

For the April-November 2017 period, cumulative sales are 16,852,978 units, an overall growth of 9.29 percent, with PVs selling 2,186,199 units (+8.46%), CVs 491,981 units (+10.60%), three-wheelers remaining almost flat with sales of 381,247 units (+1.32%) and two-wheelers clocking sales of 13,793,551 units (+9.61%). All key vehicle categories registered sizeable growth in this period, with passenger cars clocking 1,460,614 units (+4.69%), UVs selling 597,157 units (+19.95%), LCV goods carriers selling 279,682 units (+21.27%), scooters going home to 4,655,119 buyers (+16.15%) and motorcycles selling 8,572,572 units (+7.62%).

M&HCV and LCV passenger carriers, however, are on a negative trend with sales of 21,528 units (-28.17%) and 28,997 units (-12.24%) respectively between April-November 2017, and call for the government’s attention in enhancing road public transport.

SIAM maintains FY2018 growth outlook: strongest since FY2012
In light of last month’s growth, SIAM’s growth outlook for FY2018 remains unchanged from what it declared in April this year with PVs pegged to close the fiscal with growth between 7-9 percent, CVs and three-wheelers between 4-6 percent, and two-wheelers between 9-11 percent.

Nonetheless, with overall industry growth pitched to hit 8-10 percent growth, Indian automakers are headed for their best numbers since FY2012 when they clocked 12.24 percent (see table below).

“As we go along, the effect of demonetisation will get moderated and the fiscal should end with an overall growth of about 8-10 percent across vehicle segments. PVs especially will continue to see good growth in the remaining months of this fiscal. The strong growth, relative to a low base, is going to continue till January 2018 for the PV segment, which recovered very quickly after demonetization. It was the CV and the two-wheeler segments which saw the impact getting prolonged for a significant duration in CY2017 as well, due to rural India getting hit hard by the drive,” said Mathur.

FY2018 is all set to deliver strong numbers, the best since the past five years when growth numbers have not been able to drive beyond single digits – FY2013 (2.61%), FY2014 (3.54%), FY2015 (7.22%), FY2016 (3.78%) and FY2017 (6.81%).

“If we look at the numbers from 1997 onwards, the industry was confidently growing at a double- digit growth, reaching as high as 26.44 percent (FY2011). But the last five fiscals have been relatively slow. Now, the current fiscal has seen some rationalisation, with factors such as a good monsoon, uptick in demand from the rural and semi-urban areas, consumption growth, 10^th Pay Commission and higher disposable incomes, together contributing growth,” he added.

GST: Rs 6,000 crore input tax credit pending
GST has also brought in a positive impact on the overall value chain in the larger sense, but, not entirely. According to Sugato Sen, deputy general director, SIAM, “Companies like GM, Ford and Volkswagen, which are more export oriented, are facing troubles in terms of not being reimbursed with the input tax credit on their exports since adoption of the new economic regime.

The complete GST module is not yet functional across the entire network and as revealed in our recent meeting with the revenue secretary and the central board of excise and customs (CBEC), roughly Rs 6,000 crore of input tax credit on exports is pending and of that, the automobile industry accounts for close to Rs 2,000 crore. We have been assured that it is in the process of being cleared off soon.”

With new objectives of cleaner emissions, CAFE norms and improved safety lying ahead of the industry to conform, the Indian automotive sector is looking at infusing huge capital in the present scenario. “The world over, industries receive governmental support in their initial R&D expenses towards developing contemporary technologies for new compliances. It would be advisable for the Indian government as well to support our industry in the diverse R&D initiatives to meet these upcoming regulations,” Sen added.

On the policy front, the FAME scheme under the NEMMP, which has been extended to March 2018, is likely to see the draft of the FAME-2 being rolled out by end of December 2017. With the last one rolled out in 2002 and two AMPs in between, a revised automotive policy is also on the anvil from the government, giving a future direction to the automotive sector.

Lead image: courtesy Valeo

Read more: INDIA SALES: November numbers point to a robust FY2018 for industry