Indian passenger vehicle sales slide 8.2% y/y, commercial vehicles up slightly in April

The Indian passenger vehicle market has started the new financial year on a negative note, with sales dropping 8.2% year-on-year (y/y) in April to 208,386 units, as buyers stayed away from dealer outlets under the effect of high ownership costs, and slowing economic activity. According to the data released by the Society of Indian Automobile Manufacturers (SIAM), the decline was led by passenger cars, which lost 10.4% in sales volumes during the month to 150,789 units. Passenger car is the largest selling vehicle category in India and its performance often weighs heavily on the entire vehicle market. Utility vehicles (UVs) – which have been a saviour for the market so far this year – also witnessed slower growth as a result of recent increase in excise duty. Sales of UVs increased only 4% y/y during the month to 40,563 units, in sharp contrast to sold double-digit sales growth seen in earlier months – reflected in 27.9% y/y jump in sales volumes for the first four months. Sales of multi-purpose vehicles (MPVs) declined 13.4% y/y to 17,034 units in the latest month. Overall, passenger vehicle sales lost 10.9% y/y during the first four months to 934,279 units.

Although sales of light commercial vehicles increased 4.8% y/y to 38,068 units, overall light-vehicle sales (including passenger vehicles and light commercial vehicles) closed the month with a drop of 6.4% y/y to 246,454 units. Sales of medium and heavy commercial vehicles continued their declining trend and dropped 6.7% y/y to 18,610 units during the month. According to the data published by the association, total industry sales lost 6.4% y/y to 265,064 units during the month. For the first four months, total industry sales remained down 10% y/y to 1,207,519 units.

Apart from Renault which is aided by the hot-selling Duster sport utility vehicle (SUV), Honda was the only automaker among top-ten players to register a double-digit growth rate. The Japanese automakers' performance was aided by the recently launched Amaze sedan which sold a total of 4,852 units during the month. GM was another player which saw its sales going up, albeit at a lower rate. The automaker sold 8,196 vehicles during April, up 3.5% y/y. This included 3,436 units of Chevrolet Sail, 1,986 units of Chevrolet Beat and 1,571 units of Chevrolet Tavera. Mahindra & Mahindra (M&M) – which managed to outperform the slump in the wider market in earlier months – also came under pressure and posted a marginal growth in passenger vehicle shipments to 23,107 units. The automaker, however, continued to do well in the commercial vehicle segment, selling 12,055 units during the month, up 13.9% y/y.

Hyundai, Tata Motors, Toyota, Volkswagen, and Ford registered lower sales in the latest month while market leader Maruti witnessed a slight increase in sales volumes to 90,523 units. April sales data was again a grim reminder of difficult market conditions and low consumer confidence. This was the first full month after Toyota launched its facelifted Etios sedan and Liva hatchbacks; however, the move failed to attract customers to these models both of which registered lower sales from the same month last year (see India: 11 March 2013: Toyota India starts shipping face-lifted Etios and Liva).

Production down but export volumes edge up

The sluggish demand in April also spilled over to domestic vehicle production, which continued to decline during the month. Production of passenger vehicles decreased 9.43% y/y to 269,265 units which offset the 11.5% y/y gain in output of commercial vehicles. On the contrary, vehicle exports from India registered solid growth during April. Exports in the passenger vehicle segment grew 10.8% y/y to 42,304 units during the month, while commercial vehicle exports jumped 11.1% y/y to 5,101 units.

Outlook and implications

April is traditionally not a strong sales month in India and it marked the sixth consecutive month of declining car sales this time. The segment has been at the receiving end of market developments which includes high interest rates and rising vehicle prices. Automakers increased vehicle prices last month for the second time this year in response to on-board diagnostics compliance requirements coming into force (see India: 14 March 2013: Automakers in India planning another price increase next month). While this has not been entirely unexpected, an interesting development has been the tapering off of growth in utility vehicles. This follows an increase in excise duty on some utility vehicles in the latest budget (see India: 1 March 2013: India to raise tax on SUVs and imported cars, increased public spending set to boost CV sales). Coupled with partial deregulation of diesel – the fuel of choice for bigger vehicles in India – this does not come as a surprise. Passenger cars – which are still underperforming the market – have benefitted from these developments and have reduced the extent of weakness. Alongside with diesel prices going up, gasoline (petrol) has become cheaper in India, following crude oil prices in the international market. Passenger car sales fell 10.4% y/y in April while the drop stood at 22.5% y/y in March and 19.3% y/y in February (see India: 11 April 2013: Indian passenger vehicle sales decline 13% y/y, commercial vehicles drop 6% y/y in March and India: 12 March 2013: Indian passenger vehicle sales decline 16.7% y/y in February as car sales fall to historic lows). It is still too early to judge if April sales mark a trend of UVs losing some of their sales to passenger cars, easing inflation and resulting interest rate cuts are set to increase attractiveness of small passenger cars. At the same time, diesel prices will continue to go up for at least a year from here, limiting UV sales.

Commenting on April performance, SIAM's deputy director general Sugato Sen said, "Car sales have been consistently falling since November, though we still expect the industry to bounce back in next few months and come close to our forecasted 3-5% growth rate for the full year. Sales should happen in next few months with improvement in the stock market and good agriculture season." Over the next few months, the effect of new model launches including the Chevrolet Sail, Honda Amaze and Ford EcoSport may cushion overall market but is unlikely to bring about a major change in consumer sentiment which remains low. However, the government's loosening of its monetary policy will help to a great extent and any further cuts in the repo rates may only bring the positive sentiment back. This may have an upside effect on vehicle domestic sales in the second and third quarter of 2013 and beyond. The trend of seasonally adjusted new car registrations is moving in a corridor between 3.4 million units and 3.7 million units. IHS Automotive has further trimmed its calendar year 2013 light-vehicle sales forecast and now expects light vehicle sales of 3.4 million units in India this year.