Auto industry on growth path, 3-wheelers suffer

Three of the four key segment soft he automobile industry reported double-digit growth in sales in July, as dealers replenished stocks. Dealers had stopped building stocks in the second half of June to avoid transition losses due to the GS Troll-out. Sales of passenger vehicles rose more than 15 percent to 298,997 units, as most companies clocked double-digit growth in sales.

Three of the four key segments of the automobile industry reported doubledigit growth in sales in July as dealers replenished stocks. Dealers had stopped building stocks in the second half of June so as to avoid transition losses arising out of the goods and services tax that came into effect from July 1. Accordingly, June was a month of decline.

Companies that had postponed dispatches in June sold higher volumes in July. Sales of passenger vehicles (cars, vans and utility vehicles) rose more than 15 per cent to 298,997 units as most companies, including Maruti Suzuki, M&M, Toyota and Honda, clocked double-digit growth in sales. Within the passenger vehicle segment, sales of cars rose by 8.5 per cent to 192,773 units while the sales volume of utility vehicles expanded 35.5 per cent to 86,874 units. Vans, the smallest part of this segment, grew at 7.6 per cent to 19,350 units, data released by the Society of Indian Automobile Manufacturers (SIAM) showed.

“In June, dealers were liquidating their stocks while the reverse happened in July. Dealers replenished their stocks across segments last month,” Vishnu Mathur, director-general at SIAM, said. It would become clear by next month how retail sales played out during the period, he added.

Mathur expects the second half of the year to be better in terms of sales on the back of a good monsoon and with rural sales expected to pick up. Passenger vehicles sales grew by 7.9 per cent during the April-July period as compared to the same period of the previous year. For the whole year, the industry body expects growth to range between 7 per cent and 9 per cent.

Sales of two-wheelers, the biggest segment by volume, recorded growth of 13.73 per cent in July, helped by double-digit growth in both motorcycles and scooters. For a change, motorcycles reported higher year-on-year growth of 16.9 per cent in July against 13 per cent growth in scooters. Rural sentiments are helping motorcycle volume growth. Market leader Hero MotoCorp sold 5,43,938 units in July compared to 4,48,119 units in the same month of the previous year, up 21.38 per cent.

The commercial vehicle industry also reported growth after challenges in the previous months, posting a 14 per cent rise to 59,000 units. Firms sold 22,730 units of medium and heavy commercial vehicles, almost 7 per cent higher than in the same period of the previous year. Sales of light commercial vehicles also surged 19 per cent to 36,270 units. Steep discounts are also playing a role in getting fleet owners and transporters back into the market.

The three-wheeler segment remained in negative territory in July as well. Its sales shrunk 11 per cent to 41,261 units, hurting companies like Bajaj Auto and M&M.

Abdul Majeed, partner at Pricewaterhouse, said the July industry wholesale numbers reflected good growth for passenger vehicles and two-wheelers. “The smooth implementation of the GST, low inflation and a good monsoon is expected to help the automotive industry to get back to robust growth and even commercial vehicles are expected to bounce back in the second half of this financial year,” he added.

Sales of all the categories put together grew more than 13 per cent to 2.07 million units.

Some analysts, however, believe that uncertainties could impact growth. “Frequent changes in taxes and policies will dampen the spirits of the industry and customers, which will mirror in the performance going forward,” said Sridhar V, partner at Grant Thornton India LLP.