Indian passenger vehicle market grows 11.4% y/y in November; CV sales gain 8.6% y/y

Passenger vehicle sales in India grew 11.4% year on year (y/y) during November to 236,664 units, reported the Society of Indian Automobile Manufacturers (SIAM). Within the passenger vehicle category, sales of cars rose 10.4% y/y to 173,111 units while sales of utility vehicles (UVs) surged 19.7% y/y to 48,880 units. The smaller sub-segment of vans registered a slight decline of 0.7% y/y with monthly sales of 14,673 units. Strong November figures lifted the 11-month sales increase to 7.5% y/y, with a cumulative volume of 2.54 million units.

Sales volumes of commercial vehicles (CVs) improved by 8.6% y/y to 51,766 units during November. This was split between 20,145 medium and heavy commercial vehicles (MHCVs) (up 24.8% y/y) and 31,621 light commercial vehicles (LCVs). CV sales in the 11 months climbed 7% y/y to 594,153 units.

Total industry volumes (TIVs) during November rose 10.9% to 288,430 units. This double-digit sales growth pulled the year-to-date (YTD) tally to 3.13 million units, up 7.4% y/y. It is worth highlighting that the sales figures reported by the association represent dispatches by automakers to their dealers, so are not retail sales.

Production and exports dip

Despite the positive sales data for November, production and export volumes slipped during the month. Passenger vehicle output shrank 10.3% y/y to 252,203 units during the month, while CV production contracted 1.5% y/y to 59,100 units. Meanwhile, passenger vehicle exports declined 8.6% y/y in November to 51,381 units. CV exports during the month fell 2.8% y/y to 7,137 units. The slide in production volumes was largely due to heavy rains in Chennai, which crippled output at Ford, Hyundai, and Ashok Leyland (see India: 3 December 2015: Automakers again suspend production in Indian city of Chennai amid heavy rains).

Outlook and implications

Even though November growth was lower than the 19.8% expansion in total industry volume in a seasonally strong October, it indicated a continuation of the recovery, which is gradually becoming broader (see India: 10 November 2015: Indian new vehicle market surges in October on festival offers and model launches – SIAM data). In November, only four of the top 10 automakers posted lower sales than in the same month last year. While traditional leaders Maruti Suzuki and Hyundai posted double-digit sales growth in the month, Mahindra & Mahindra (M&M) reversed its losing streak with a 35.9% y/y jump in monthly sales. Mahindra sales were helped by the recently launched TUV300 sport utility vehicle (SUV) (see India: 10 September 2015: M&M launches new TUV300 SUV in India). Similarly, Maruti and Hyundai are benefiting from new models (see India: 26 October 2015: Maruti Suzuki launches Baleno in India and India: 21 July 2015: Hyundai reveals pricing, launches Creta compact SUV in India).

Honda surprisingly posted a 3.6% y/y decline in sales volumes, reflecting last year's higher base due to key model launches. Tata's sales also contracted in November, by 13.6% on the same factor. Among the smaller players, Ford and Renault achieved strong sales growth on the back of their newly introduced vehicles: the Figo Aspire compact sedan and the Kwid hatchback respectively (see India: 24 September 2015: Renault launches Kwid budget hatchback in India). On the other hand, Toyota and General Motors (GM) posted lower sales in the month.

While there were no more interest rate cuts in November, lower fuel prices and soft inflation are among the factors encouraging consumers to buy vehicles. At the same time, announcements by leading automakers, including Maruti Suzuki and Hyundai, that they will raise vehicle prices in 2016 are prompting buyers to bring forward their purchases (see India: 11 December 2015: Maruti Suzuki to increase vehicle prices in January, domestic mutual funds continue to oppose Gujarat plan – report).

On the production front, the headwinds are now abating. While floods in Chennai crippled output for five days, most automakers have resumed operations and hope to offset lost production during December (see India: 8 December 2015: Hyundai, Ashok Leyland resume production in India after floods).

As seen above, passenger vehicle sales are now almost entirely driven by newly launched models. Automakers without new products are therefore losing market share. IHS Automotive believes the combination of weak inflation, low interest rates, and price increases in 2016 will drive sales volumes in December and in 2016 as well. We have pencilled in a growth rate of 10.2% y/y for the Indian light-vehicle market in 2016 to 3.43 million units.