Automobile Industry of India went into deep troubles in July with sales at some of the top passenger vehicle makers plunging to their worst in about last two decades.
Growing economic uncertainties, the slowdown in new investments and problems in non-bank lending space has reduced the demand from both rural and urban customers.
This was aided by an increase in vehicle insurance costs last year and a credit squeeze forced several consumers to defer their automobile purchases.
The country’s largest carmaker Maruti Suzuki India Ltd. has reported 37 percent domestic passenger vehicle sales from the last year earlier in July. Second-ranked Hyundai Motor India Ltd. recorded a 10 percent drop while total sales fell 16 percent at Mahindra and Mahindra Ltd. At Toyota Motor Corp. and Honda Motor Co., the sales fell 24 percent and 49 percent respectively in July.
Sales of five companies which together make up about 85 percent of India’s passenger vehicle market have fallen nearly 31 percent last month from last year.
Here is the decline in sales percentage in July
- Maruti Suzuki- 36.71 percent
- Hyundai- 10.28 percent
- M&M- 14.91 percent
- Toyota Kirloskar- 23.79 percent
- Honda Cars- 48.67 percent
Vehicles Sales in India have now declined for the ninth month in a row and shows a bad sign for the automobile industry.
N. Raja, Deputy who is Managing Director at Toyota Kirloskar Motor said in a statement, “ The industry is deeply concerned with the increasing pressure of low customer sentiment faced by the sector. The high insurance costs, rise in taxes and liquidity crunch across the non-banking finance segment, tightening of lending norms have significantly affected the domestic sales in the last few months.”
Raja said Toyota is “trying to lend maximum support to our dealers through the hard times faced by the industry by maintaining lean inventory.”
Shortage in demand scenario has pushed automakers and their parts suppliers to temporarily suspend their production in July.
According to the Federation of Automobile Dealers Association, the crimped demand has led to nearly 300 dealers shut their operations. Meanwhile, banks are keenly watching the sector, primarily tightening the formal processes for wholesale financing, which, dealers say, is hurting them in terms of financing new stock.
Maruti recorded total domestic passenger car sales of 96,478 units in July. Sales fell in all segments excluding the mid-size sedan Ciaz. Hyundai has reported sales of 39,010 units in July.
Mahindra & Mahindra has also reported a decline of 16 percent from last year in its total domestic sales to 37,434 units in July. Its passenger vehicles sales lowered 15 percent to 16,831 units during the month, while commercial vehicle sales declined 17 percent to 15,969 units.
Sales of Toyota vehicles fell to 10,423 units. Honda performed even worse with sales plunging to 10,250 vehicles.
The drop in wholesale numbers hints at more production cuts, which automakers have been undertaking to manage unsold inventory. Veejay Ram Nakra, chief of sales and marketing, automotive division, M&M, hopes that the buying sentiment would improve in the run-up to the festive season.
Preliminary reports also suggest that sales of the commercial vehicle industry have dropped by more than 10% in July, led by Ashok Leyland. The Chennai-based company has reported a 29% decline in its July sales. Tata Motors had not released its July sales at the time of this report going to press.
With India slipping to 7th in the world economy and Indian Automobile industry facing a shortage in sales, these signs are not got and indicate towards a possible economic meltdown. Let’s hope next quarter comes up with a piece of positive news.