Car sales skid in October despite festive cheer

Festivities failed to drive up car sales, at least for the top three car makers, this October. Market leader Maruti Suzuki India reported a sharp 52.2% plunge in October sales at 51,458 units as against 10,755 units in the same month last year.

Hyundai Motor India’s domestic sales fell 5% to 33,001 units (34,709) whereas Tata Motors’ passenger vehicle business reported a 3% decline at 25,746 units (26,503) due to a fall in the sales of Fiat vehicles.

Analysts say costlier auto loans and surging fuel prices are forcing potential customers to defer purchases. While the big three reported a decline in sales, General Motors India posted only marginal growth.

Mahindra & Mahindra, Toyota Kirloskar Motor and Volkswagen India were the only players to post a healthy sales growth.

Both Dussera and Diwali sales fell this year in October while usually, sales rise around these festive occasions. Car makers were hopeful that the two-month festive season would push up demand, which has remained subdued this financial year.

The average monthly instalment on a car loan has increased by more than Rs1,100 since March last year due to several rounds of interest rate hikes.

Additionally, finance companies are now also demanding 20% of the vehicle cost as down-payment - this has hurt the marginal customers of entry level cars such as the Tata Nano, Maruti Alto and even the Hyundai Santro.

Maruti reported a 55% decline in mini car sales (combined sales of M800, Alto, A-Star and WagonR) to 25,009 units (55,404) last month. Company officials said sales of the entry-level Alto have declined to about 22,000 per month in the second quarter against 27,000 per month in the last fiscal.

According to Aditya Makharia and Ritesh Gupta of JP Morgan, Maruti offered 40% more discounts in Q2 over Q1 (at Rs13,500 per unit) and that the company continues to face headwinds on sluggish demand, rising competition and an appreciating yen.

Sandeep Pandya and Ankit Mehrotra of Goldman Sachs said average channel inventory for Maruti has come down to two to three weeks from the normal four to five week levels and fiscal 2012 should be “a second consecutive year of earnings decline, mainly on higher technology costs (three percentage point impact of higher royalties since fiscal 2011)...and the recent industrial issues at the company’s Manesar plant”.

Maruti lost production of more than 40,000 vehicles this October due to the fortnight-long labour unrest. Sales at M&M rose 20% to 41,506 units, helped by a strong demand for the XUV500 sports utility vehicle and light commercial vehicles. GM India was nearly flat at 10,062 units (10,051) while Ford India fell 10% to 8,091 units. Volkswagen climbed 67% to 7,266 units (4,343) and Toyota rose 63% to 10,762 units (6,602). Honda Siel Cars grew 4.8% at 5,526 units (5,275).

Two-wheelers

Not just cars, the slowdown in vehicle sales has percolated down to bikes, too. Hero MotoCorp, the country’s biggest bike maker, reported almost flat growth last month of 1.32% at 512,238 units (505,553). The company claimed retail sales growth (sales from dealers to customers) at 6.5 lakh units against just over 6 lakh units in the same month last year.

But Honda Motorcycle & Scooter India reported a 20% growth at 178,181 units (148,861), largely due to a jump in scooter sales. India Yamaha Motor logged a 26.8% growth rate at 47,240 units (37,251).