High fuel prices & interest rates slow auto sales in INDIA.

Automobile sales in India grew at a much slower pace in May as high fuel prices, interest rates and higher car prices discouraged buyers  from purchasing new vehicles.

                The Indian automobile industry, that had been registering whopping sales figures since last one and a half year, are now witnessing a sudden dip in their sales. As the hike in car loan interest rate and rising fuel costs keep the car buyers away from show rooms.

                In the month of may 2011, the car sales in the country surged a mere 5 percent as compared to the staggering 35 percent growth registered a year ago. The top three car makers in the country – Maruti, Hundayi and Tata – registered a lower growth figures as compared to the previous year. Gripped in the slow down, almost every major car maker saw a fall in the growth rate during may, indicating the changing scenario of the Indian car market.

          It is reported that inventories At dealers have increased from 20-25 days to 40-45 days in the last four months.

          Maruti Suzuki India ltd., the largest car maker in the country, reported a moderate sales growth of about 4 percent, a steep fall from last year’s 27 percent growth selling 104,073 units compared to 102,175units in may 2010.

           Sales of Tata motors passenger vehicles dipped by 9% for may 2011, and stand at 10,401 as compared to 21,324 for may 2010, and stand at 19,401 as compared to 21,324 for May 2010. Tata Nano sales in the Indian auto market stand at 6,515, which is 84% higher than may 2010, and cumulative sales figures for the vehicle stand at 16,527 units, which marks a 134% spike as compared to May 2010 when 7,075 units were sold. But in April 2011 Tata sold more than 10000 units of Nano.

                Indica sales dipped by 35% and stand at 5,497 units for May 2011, whereas the Tata indigo sales were recorded to be 4268 units for May 2011, which also marks a 35% sales loss. A sales figure of 3121 units for the Sumo/ Safari/ aria/ venture range marks a 15% sales growth rate for the same period last year. Jaguar Land Rover sales reports support positive growth.

                Tata motors registered a sales figure of 62,296 vehicles for May 2011in regards to passenger, and commercial vehicles, and include exports. This helps company register a 10% growth in sale figures as compared to the same period the previous year when they sold 56,775 vehicles. Domestic sales figures are registered at 56,762 vehicles for May 2011, which grew by 8% from the 52, 799 vehicles sold in May 2010.

                Mahindra and Mahindra Ltd (M&M) seems to be an exception as the demand for this utility vehicles continued to expand at a brisk pace. It sold 32,159 units (including commercial vehicles and cars), an increase of 19% over last year.

                The largest car exporter, Hyundai India, however, performed comparatively well with over 14 percent growth in sales during the month as against 15.5% jump registered in the same month last year. Led by the newly launched sedan, Verna Fluidic, sales at Hyundai Motor India Ltd rose to 31,123 units. The company said it has received bookings for 12,000 units so far. Hyundai, too, saw its exports decline by 15%.

                Some foreign car makes continued to grow rapidly on account of low base or a launch. For instance, Skoda auto India Pvt. Ltd sold 2,761 units against 1,381 units over a year ago, while sales at Toyota Kirloskar motor Pvt. Ltd went up 12% to 7,470 units over last year on account of demand for its new Etios sedan. Mercedes-Benz India continued it’s traction in the Indian luxury car market by clocking 561 units compared to 411 units in May 2010. Skoda auto India announced a sales growth of 100% fo May ’11 over the same period last year. Driven by its small car Micra, sales at Nissan Motor India Pvt. Ltd also rose to 1, 588 units in May compared with 56 units last year, but sales at general motors India Pvt. Ltd remained flat at 8,329 units.

                A Ford motor, the legendry US auto manufacturer, has reported a 12.79% slump in Indian sales figures. In May 2010, ford old 8,080 units in India while in May 2011, ford managed to sell only 7,046 units, despite the exponential growth of Indian auto industry.

                Meanwhile, motorcycle and scooter sales continued to grow at a healthy pace and most manufactures reported double- digit growth. Market leader hero Honda motors Ltd led pack with a 14.2% increase to 520,000 units. Experts say demand for motorcycles and scooters usually increases when petrol prices rise because they are more fuel- efficient than cars.

                Bajaj auto, the leading two and three wheeler maker in the Indian market, has registered the highest ever monthly motorcycle sales in the month of May 2011. The company sold a total of 3,17,989 units of it’s bikes in the country during this month as compared to 2,69,488 units sold in the same month last year, accounting for a growth of 18 percent.

                Baja auto also reported company’s highest ever exports figures in the month of May at 1,26,818 units as against to 95,964 units dispatched to overseas markets, same month last year, accounting for an exports jump of 32.15 per cent.

                In the three-wheeler segment, the company reported a jump of 36.41 per cent during the month. It managed to sell 40,860 units of three wheelers during the month as compared to 29,954 units in May 2010.

                Prompted by new product offerings and marketing initiatives, two- wheeler, manufacturer Yamaha motor’s Indian subsidiary reported a domestic sales growth of 59% in May as compared to the like period in 2010. The company sold 27,959 units as compared to 17,614 units sold last year. The overall sales, including exports, grew by 55%and stood at 38,812 units for the month as compared to the corresponding month last year. In a statement here yesterday, the company said total sales last month were total sales last month were 185,930 units, as against 156,980 units in May 2010. TVS Motor sold 181,891 two-wheeler last month, compared to 154,667 units sold in May 2010.

                According to industry experts, the ca industry is expected to be gripped in a slow-down for at least next three months.

                With automotive sales losing pace, the auto finance business may also hit a bump in FY12. Rising interest rates on loans couples with moderating automotive sales peg the industry growth at between 13 to 14% for the current fiscal. Since most vehicles purchases are bankrolled, the auto finance business is also expected to mirror vehicles sales.

“Our fortunes are very closely linked to the automobile industry. The industry is showing the first signs of a slowdown, coming off tow successive years of high growth. Commercial vehicles sales are likely to be impacted on account of increase in price of vehicles, imminent increase in diesel prices and higher interest rates , “said T T Srinivasaraghavam, MD, Sundaram finance.

                In the last one year, while the petrol price has gone up seven times by almost Rs.7 a litre, interest rates on auto loans have also increased by 100-150 bps. All the major automobile companies have marginally raised the price if their products in the range of 1-2%.

                With headline inflation showing no signs of decline, experts believe that interest rates and prices of automobiles will only increase further, there by laying further stress on auto finance business.

(Source- Creative Business June-July 2011)