Slug­gish Sales Make Di­wali a Dull Af­fair for Au­tomak­ers This Year

Ris­ing fuel prices, in­ter­est rates and choppy stock mar­kets keep buy­ers away

The Economic Times - - Companies: Pursuit Of Profit -

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.

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