The Indian automotive industry is facing a slowdown despite overtaking Germany this year to become the world’s fourth biggest automobile market.
After the lacklustre festive season and softening of sales in October, it is bad news for passenger as well as commercial vehicle manufacturers in Asia’s third biggest economy.
Sales of the key segments of passenger vehicles and medium and heavy commercial vehicles (M&HCVs) were down by 3.43 per cent at 2,66,000 units and 10.97 per cent at 25,363 units respectively during November, top industry lobby body Society of Indian Automobile Manufacturers or Siam said on Monday.
Sales in the three-wheeler segment also fell by 11.19 per cent at 53,401 units. But the silver lining came from the two-wheeler segment last month.
Sales of scooters grew 3 per cent, though a much slower growth of 12.59 per cent in October, to 521,542 units. Sales of motorcycles too stood at 9.36 per cent, against 20.14 per cent in October, with sales of 1,049,659 units.
Siam cited low consumer sentiment and tight liquidity as the key reasons for the slowdown. “After the end of November, we now have a better idea about how the festive season went for the automotive industry. It is a muted one,” Vishnu Mathur, director general at Siam, said.
He said while most segments, including passenger vehicles and heavy commercial vehicles, showed de-growth in November, the industry has also seen a positive growth coming in from light commercial vehicles and two-wheelers.
“Largely, it is a situation where the industry is doing inventory correction by reducing the production because the festival season was muted and dealers have leftover stock with them,” Mathur pointed out.
“Also, as we near the end of the calendar, the industry would like to minimise the inventory level,” he said. Mathur said liquidity crunch, rising fuel prices and rising interest rates had impacted commercial vehicle sales in the country.
“Thus, while there is demand, operators are postponing their purchases,” he explained.
Ashish Modani, assistant VP, corporate sector ratings at ICRA, said focus on inventory rationalization by dealerships during festive season took a toll on November wholesale dispatches. “The passenger vehicle sales are likely to remain tepid in the near term, with some improvement expected during Q4 FY2019,” he said.
Unlike commercial vehicle sector where NBFCs plays a vital role in retail financing, passenger vehicle retail sales are largely funded by banks and hence liquidity related pressure should not have any material impact on passenger vehicle sector, Modani said.
“Demand environment from rural market remain a key sensitivity to watch out, whereas urban demand is likely to remain muted over the next few months,” he pointed out.
Icra said unlike the trend over the past 12-14 months, the medium and heavy commercial truck sales declined in November 2018 as the adverse impact of tightness in the financial system and weakening viability of SFO started playing out.