All eyes are on fes­ti­val sea­son as slow­down hits PV sales

Mint Asia ST - - Mark To Market -

The

pas­sen­ger ve­hi­cle (PV) seg­ment con­tin­ued to wit­ness a slow­down in sales growth for the third month in Septem­ber.

No won­der then that in­vestors in auto stocks are jit­tery. The BSE Auto in­dex has fallen by 14% since April, even as the bench­mark Sensex gained 7.4%. The moot ques­tion is whether this quar­ter’s slow­down in sales will trip the up­ward growth tra­jec­tory seen for about 18 quar­ters. Or, will the fes­tive sea­son bring some cheer to rev up sales?

The prob­lem here is that four of the six large au­to­mo­bile man­u­fac­tur­ers by do­mes­tic mar­ket share—maruti Suzuki In­dia Ltd, Hyundai Mo­tors In­dia Ltd, Mahin­dra and Mahin­dra Ltd, and Honda Cars In­dia Ltd—led the 2.7% year-on-year sales de­cline for the month. As a re­sult, the quar­ter ended on a weak note with do­mes­tic sales grow­ing by just 1.8% from the year-ago pe­riod.

Be­sides, dealer feed­back sug­gests buy­ers have turned cau­tious about mak­ing PV pur­chases, which is a wor­ry­ing sign. The un­abated in­crease in fuel prices is a damper, with

IN SLOWER GEAR

the ru­pee de­pre­ci­at­ing and in­ter­na­tional crude oil price hit­ting new highs al­most ev­ery day.

The gov­ern­ment’s move to cut fuel prices may bring some respite on this front. In­ter­est rates are set to rise, even as ve­hi­cle in­surance costs have gone up. Cus­tomers are de­fer­ring sales due to ris­ing own­er­ship costs.

How­ever, there is an op­ti­mistic viewpoint too that thinks the Septem­ber quar­ter was an aber­ra­tion. Firstly, the floods in Ker­ala damp­ened sales in the state. Se­condly, the last fort­night of Septem­ber saw some cus­tomers stay away from buy­ing goods since they be­lieve this to be an in­aus­pi­cious pe­riod. Lastly, there could be a base ef­fect too. A de­layed fes­ti­val sea­son this year means that some sales may have got pushed to Oc­to­ber and will re­flect in the De­cem­ber quar­ter sales growth. If so, this should be­come clear in a month’s time.

Ac­cord­ing to Subrata Ray, se­nior group vice pres­i­dent at Icra Ltd, “A clearer trend would be vis­i­ble only af­ter the fes­tive sea­son in the cur­rent quar­ter. Also, a key trig­ger for de­mand is the ru­ral mar­ket, where the trac­tion ap­pears to be strong. Hir­ing trends in the in­for­ma­tion tech­nol­ogy sec­tor are a pos­i­tive for auto sales.” He adds that the im­pact of higher fuel price and in­ter­est costs tends to be rel­a­tively short term, if the un­der­ly­ing de­mand driv­ers are strong.

It is only when in­fla­tion­ary pres­sures per­sist or fears of job loss set in that they af­fect dis­cre­tionary pur­chases. If these fac­tors be­gin to show up in data, it could be a cause for con­cern.

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.