Car makers set for record sales in FY2018 as July sales numbers soar

The Top 5 passenger vehicle manufacturers have notched smart growth in July 2017, indicating good times are in store for industry.

By Mayank Dhingra

01 Aug 2017

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Car makers set for record sales in FY2018 as July sales numbers soar

The buzz is back in the Indian passenger vehicle (PV) sector with GST giving the automobile industry the extra acceleration it needed to take the leap to the next level. Thanks to the sizeable taxation relief GST has afforded to PV and particularly UV makers, initial sales numbers for the month just gone by indicate good times are back.

With most carmakers passing on the price benefits in lieu of the GST rate cut to the customers, domestic sales numbers are witnessing a strong uptick, with certain segments like UVs continuing the aggression, even more fiercely, due to the substantial 12 percent tax reduction post-GST.

From the July 2017 domestic sales numbers released by the Top 5 carmakers, it’s amply clear that the Indian PV industry will notch even higher gains in FY2018 than it did in FY2017, when it crossed the 3-million-mark for the first time.

The first indication came in at 10.15am today when Maruti Suzuki India rolled out its sales numbers for the month – 153,298 units for July 2017, up 22 percent (July 2016: 125,264). With plenty of manufacturing capacity on hand, now that the Gujarat plant is humming away smoothly, the carmaker is firing on all cylinders feeding the domestic market with all it can absorb. If July numbers are any indication, then expect Maruti to keep crossing the 150,000 unit sales mark month after month.

Importantly, for the company, the sales growth is across all vehicle segments – cars, utility vehicles and vans. The entry level duo of the Alto and Wagon R sold a good 42,310 units, up 20.7 percent (July 2016: 35,051), indicating that demand for these two popular hatchbacks remains as strong as ever. The company’s six compact cars comprising the Swift, Ritz, Celerio, Ignis, Baleno and Dzire sold 63,116 units, up 25.3 percent (July 2016: 50,362). The Ciaz premium sedan, which is now sold only from the premium Nexa channel, sold a total of 6,377 units, up 41 percent YoY (July 2016: 5,162). The two vans – Omni and Eeco – sold 15,714 units, up 6.6 percent (July 2016: 14,748).

Sales of Maruti UVs (Gypsy, Ertiga, Vitara Brezza, S-Cross) crossed the 25,000-unit mark for the first time in a month, up 48.3 percent to 25,781 units (July 2016: 17,382). Like the other OEMs with SUVs, expect Maruti to continue riding the huge wave of SUV demand in the coming albeit with the upcoming entry of the Tata Nexon and Jeep Compass, some demand could go their way.

The premium Ciaz also found 41 percent more homes, selling 6,377 units (July 2016: 5,162). The sedan’s diesel mild-hybrid version, the SHVS, however, has been struck by the high taxation (43%) on hybrids under GST, and along with its MPV cousin, Ertiga SHVS, has fallen flat, with demand virtually diminishing, owing to the drastic price increment.

According to RS Kalsi, executive director (Marketing and Sales), MSIL, “The situation is grim for the mild-hybrid variants of the two models. While we have appealed to the GST Council through SIAM, we would wait for the government’s response and see how things turn out, before planning out anything further.”

Hyundai Motor India, the No. 2 carmaker, has registered sales of 43,007 units in July, up 4.4 percent year on year (July 2016: 41,201). Commenting on the numbers, Rakesh Srivastava, director (Sales and Marketing), said: “Hyundai with a growth of 14.5 percent month on month and 4.4 percent year on year, continued its growth momentum on the strength of strong performance by the Grand i10, Elite i20 and Creta. The higher growth momentum is due to lowering of prices on account of GST implementation and a good monsoon which will increase customer confidence and sentiment towards vehicle buying.”

The company is also set to introduce its next-generation Verna sedan in the market in the coming months, to take on a growth path in the segment.

UVs catapult growth

A 12 percent reduction in taxation is only fuelling the Indian consumer’s penchant for SUVs. While most manufacturers did announce drastic price cuts at the onset of July, new model launches, of the likes of the Jeep Compass, have also been able to take leverage of the lower tax rate and get priced aggressively.

Homegrown UV major, Mahindra & Mahindra (M&M) has reported sales of 20,962 vehicles in July 2017 from its PV business, registering strong 21 percent YoY growth (July 2016: 17,356). According to Rajan Wadhera, president, Automotive Sector, M&M, “We are happy with the overall performance in July 2017. The benefit of a good monsoon, the successful rollout of GST and a good run up to the festive season, starting from August, give us confidence of continuing a robust growth in Q2”.

The coming of GST and the huge taxation relief it gave to SUVs is benefiting manufacturers of utility vehicles in a big way.Toyota Kirloskar Motor, which had seen subdued sales in June, has bounced back with sales of 17,750 units in the domestic market in July 2017 – its best-ever performance for the seventh month of the year – registering over 43 percent year-on-year growth (July 2016: 12,404).

TKM’s sales, not surprisingly, have been driven by the massive consumer demand for the Innova Crysta MPV and new Fortuner SUV, both having clocked their highest ever unit sales since launch in May 2016 and November 2016 respectively.The recovery after GST has been strong as customers flocked to benefit from the massive price reductions of up to Rs 217,000 on the Fortuner, Rs 98,500 on the Innova Crysta, and up to Rs 92,500 on the Corolla sedan.

Commenting on the monthly sales, N Raja, director and senior VP (Sales & Marketing), Toyota Kirloskar Motor, said, “We are thankful to the government for the biggest indirect tax reform of the nation, which has helped us maintain the double-digit growth this month. In June, putting the dealers’ need ahead we had consciously taken the decision to lower the volumes of vehicles sold to them as we wanted to ensure that there is minimum burden on our dealer partners of any differential tax after GST. However, we are delighted that we have been able to achieve the milestone of best-ever July sales.”

“The Innova Crysta has seen impressive growth in July, with over 9,300 units sold. We are delighted that this month our MPV leader has achieved the milestone of highest-ever sales globally. The new Fortuner has also been a major contributor to overall growth with over 3,400 vehicles sold, which is the highest ever in India since the vehicle’s launch.

“Apart from the SUV segment, the Corolla, Platinum Etios and Etios Liva have also witnessed a positive growth momentum in the month of July.

“However, the customer demand for our strong hybrid product Camry Hybrid has seen a significant fall owing to the price hike as per applicable tax under the GST framework. We hope the government would reinstate the preferential (lower) tax rate in favour of clean and green technologies such as strong hybrids similar to the pre- GST era. This will greatly help improve the economic viability and hence aid the consumer in choosing this advanced technology over petrol/diesel vehicles,” concluded Raja.

Tata Motors too notched an improved performance with total PV sales of 14,933 units, up 10 percent YoY (July 2016: 13,547) due to continued strong demand for the Tiago and the Tigor. While the passenger car segment marginally de-grew by one percent at 12,125 units, the UV segment grew by 110 percent at 2,808 units due to strong demand for the Tata Hexa crossover which saw a reduction of up to Rs 217000 in prices post-GST, and drawing in new customers.

Speaking on the sales results, Mayank Pareek, president, Passenger Vehicles Business Unit, Tata Motors, said, ”With an improved customer buying sentiment post GST, we are delighted to record a growth of 10 percent in the passenger vehicle market, in July 2017. The Tiago continues to witness strong demand; the Tigor and Hexa have also witnessed strong traction in the market. We continue to maintain cautious optimism and will work towards turning around the business, in line with our well-defined strategy.”

Ford India registered an uptick in domestic sales by 18.97 percent, with numbers closing in at 8.418 units (July 2016: 7,076).

According to Anurag Mehrotra, managing director, Ford India, “While there will be short term administrative headwinds associated with GST and rising input costs, we believe a good monsoon, conducive financing rates and consumer confidence during festival season will provide a good impetus for the industry. At Ford, we remain committed to building a sustainable and profitable business based on our four strategic pillars of a strong brand, right products, competitive cost and effective scale.”

Honda Cars India has announced sales of 17,085 units in July 2017, up 22 percent (July 2016: 14,033). The Japanese carmaker has been maintaining strong sales momentum in the current fiscal year and has sold 55,647 units during the April-July 2017 period (+21%) as against 45,880 units in April-July 2016.

The WR-V has become Honda’s best-seller in India, driving past longstanding topper, the City. The WR-V sold 4,894 units to the City’s 4,854 units last month. The Jazz (2,971), Amaze (2,913), BR-V (1,042), Brio (396) and CR-V (15) were the other sales contributors.

Yoichiro Ueno, president and CEO, Honda Cars India, said: “We were able to post good growth in July with strong sales numbers across models. The post-GST price benefits, healthy monsoon and onset of festive season in many regions from August will give another boost to our sales.” We have increased the WR-V supply, which is reflected in the good numbers posted by the model in July.”