Sluggish Sales Make Diwali a Dull Affair for Automakers This Year
Rising fuel prices, interest rates and choppy stock markets keep buyers away
Sharmistha Mukherjee & Ketan Thakkar
New Delhi | Mumbai: India’s leading vehicle manufacturers recorded their worst Diwali in recent times, hit hard by rising fuel prices, higher interest rates, insurance costs and choppy stock markets — all conspiring to impact consumer sentiment.
Several manufacturers and dealers ET spoke to said that while wholesale numbers have picked up last month because of inventory build-up at dealerships ahead of Dhanteras and Diwali, demand on-ground remained sluggish.
As per industry estimates, retail off-take of two-wheelers fell 1012% this festive season (a month long period from Navratra to Diwali). And while retail demand for passenger vehicles is estimated to have declined by 0-5%, manufacturers have resorted to heavy discounting to push sales of heavy commercial vehicles (HCVs).
“This festive season has been very, very dull. Manufacturers build inventory anticipating demand during Dhanteras, Diwali, which got reflected in the wholesale numbers for October. But except for small commercial vehicles (sub one tonne/one tonne), retail demand has been weak across categories,” said Nikunj Sanghi, director at Federation of Automobile Dealers Association (FADA).
Automakers traditionally register an increase of up to 20% in retail sales during the festive period. Vikas Jain, national sales head at Hyundai Motor India, said things have picked up since Navratri and Dussehra, but it has not been an usual Diwali from an industry perspective. “We have done well due to our new Santro, but it could have been a better November from an industry point of view; the inventory levels are at a slightly elevated levels in the industry," said Jain N Raja, deputy MD of Toyota Kirloskar, too said that the sentiment is subdued and people are cautious, which has affected demand. Like Jain, Raja said things have picked up since Navratri, but still retail offtake is 15-20% lower in the 8-10 days of November.
“In the North and West, the demand is better than the rest of the country, but there is uncertainty in the system which is affecting sales,” said Raja
“Apart from the increase in the cost of vehicle ownership, the decline in the stock market has affected adversely the sentiments of salaried professionals, small businessmen who have been investing their savings in mutual funds. Our retail volumes for the festive period, at best, are likely to remain flat this year,” confirmed an execu- tive with a leading passenger vehicle maker on the condition of anonymity.
A 15% increase in fuel prices, 100% rise in upfront insurance costs, and a 50 basis point inflation in financing costs in the past few months have, in fact, translated into the weakest festival sales the industry has recorded in over five years, said industry observers.
“Till the end of October, sales have been slow and it wasn't like a festive season,” said Society of Indian Automobile Manufacturers director general Vishnu Mathur, adding, “The real impact of festive sales will be known only next month as Diwali was in November this year.”
According to data available with the industry body, passenger vehicle wholesale volumes in October inched up marginally by 1.5% to 284224 units. Passenger vehicle sales had dropped by 5.6% in September by 2.46% in August and 2.7% in July. Sales of commercial vehicles rose 24.8% to 87147 units last month, and those of two-wheelers grew by 17.2% to 2053497 units in October, according to SIAM. Automakers in the country reported wholesale dispatches made from factories and not actual sales made to consumers.
Mathur is optimistic that with passenger vehicle sales veering into the positive territory last month, momentum may pick up in the coming months.