SUVs, compact cars prop up auto sales


Mumbai: A strong preference for sport utility vehicles (SUVs), particularly compact SUVs, and new compact car models propped up sales at most auto firms in July.

Cumulative domestic sales of the top 10 passenger vehicle makers by volume rose 18.02% to 254,081 units from 215,290 units a year ago, monthly sales data released by companies on 1 August showed.

Car market leader Maruti Suzuki India Ltd topped the sales tally, dispatching 125,777 units. Led by the Baleno hatchback, its compact car volumes advanced 4.1% to 50,362 units. The segment, which also includes Swift, Dzire and Ritz models, now accounts for a bigger chunk in the carmaker’s total sales. But entry-level models such as Wagon R and Alto, which used to drive overall sales until a year ago, continued to fall, dropping 7.2% to 35,051 units, compared with the same month last year.

The contraction crimped the company’s overall passenger car sales, restricting it to a growth of 2.2% to 93,634 units over the same period last year. The Vitara Brezza continued to post strong volumes, pushing utility vehicle sales to 17,382 units from 6,916 units a year ago.

Encouraged by the strong demand, Maruti has increased the prices of select models, ranging from Rs.1,500 to Rs.20,000, a company spokesperson said.

In July, higher discounts offered by firms to tide over an otherwise dull month also helped sales, which are expected to remain buoyant in the coming months as auto firms enter the festive season with new models. The season peaks in October, with all three key Hindu festivals—Navratra, Dussehra and Diwali—falling in the same month this year. Passenger vehicle sales have expanded for 12 straight months as the economy grew 7.9% in the March quarter, recording a five-year-high growth rate of 7.6% in 2015-16.

Meanwhile, led by Creta SUV, Grand i10 and i20 hatchbacks, Hyundai Motor India Ltd, India’s second largest carmaker by volume, saw its sales rising 12.9% from a year ago to 41,201 units. Rakesh Srivastava, senior vice-president of sales and marketing, attributed it to the strong performance of newly-launched models in a market that is showing improved customer sentiment, led by a good monsoon, low inflation, reduced interest rates and dropping fuel prices.

It was also a strong month for Mahindra and Mahindra Ltd (M&M), which leads the utility vehicles market. The Mumbai-based firm saw sales of its passenger vehicles jump 20% to 17,356 units, thanks to new utility vehicle models such as TUV 300 and KUV 100. Pravin Shah, president and chief executive, said, “The advent of a good monsoon has brought in a positive sentiment in the economy and that is somewhat reflected in our performance. At Mahindra, our growth is being driven by various product launches of the last financial year, which have been in sync with customers’ requirements.”

Helped by new models and a low base, sales rose at most other manufacturers, including Renault India Pvt. Ltd (609.85%), Ford India Pvt. Ltd (62.22%), Toyota Kirloskar Motor Pvt. Ltd (2.77%), Nissan Motor India Pvt. Ltd (125.91%) and Tata Motors Ltd (31.08%). The only exception was Honda Cars Ltd, where sales fell 24.6% to 14,033 units, compared with a year ago. It has been grappling with the sudden shift in demand for petrol models.

Sales at Hero MotoCorp Ltd, India’s largest two-wheeler maker, rose 9.13% to 532,113 units from a year ago. The second largest, Honda Motorcycle and Scooter India Pvt. Ltd, too, saw sales rise 17% to 453,844 units. Other two-wheeler firms, including Yamaha Motor India Pvt. Ltd, TVS Motor Co. Ltd and Royal Enfield India Pvt. Ltd, also reported strong sales.

Oil marketing firms on 31 July cut prices of petrol by Rs.1.42 a litre and of diesel by Rs.2.01 a litre. The move may push auto sales and reduce cost of ownership.

The implementation of the Seventh Pay Commission suggestions, which promise to raise the disposable incomes of millions of government staff, a good monsoon and benign fuel prices are expected to boost sales momentum. The government has decided to pay seven months’ arrears at one go in August, Mint reported on 30 July.

On 20 July, the International Monetary Fund (IMF) trimmed India’s growth forecast for 2016-17 to 7.4% from 7.5% projected in April, blaming sluggish recovery in private investment. But carmakers remain optimistic. Maruti estimates the local car market to reach five million units in annual sales by 2020, making the country the fourth largest market in the world.

A good monsoon has also stoked hopes of strong sales. The rain in August-September, the second half of the season, is seen at 107% of the long-period average, India Meteorological Department said in a note on Monday. A good monsoon could push farm growth rates to 6%, Crisil Research Ltd said in a report on 27 July. In such a positive scenario, GDP growth could cross 8% and average retail inflation, fall under 5% during 2016-17, the report said.

Subrata Ray, analyst at ICRA Ltd, expects passenger vehicles to end the fiscal with a growth of 9.5%. The growth, he said, will be driven by new and existing compact SUV models. A good monsoon, he pointed out, will be yet another positive for auto sales. “Going by the current monsoon trend, a pick-up in rural demand will be another plus,” Ray added.