Indian car and motorcycle companies have registered a considerable decline in sales, here's why
It is not usual when a car manufacturer like Maruti Suzuki reports a sharp decline in terms of passenger car sales. However, there are other automobile companies like Mahindra and Tata Motors who have reported a drop in sales. Going by the official number, the wholesale number of vehicles that were sold in April 2019 amount to 2.45 lakh units, which is 17 per cent lower than the same compared to that of April 17 at 2.96 lakh units.
Maruti Suzuki's domestic sales for April 2019 stood at 1,31,385 units which was 1,63,434 in April 2018, marking a year-on-year (YoY) of 20 per cent. Contributing to this was the low demand for vehicles such as Swift, Baleno, Celerio and the Dzire that saw a drop of 14 per cent. And this trend was also seen in its premium offering, Ciaz, with a sales drop of 45.5 per cent. The only gainers for the company were the utility vehicles (Gypsy, Ertiga, S-Cross, Vitara Brezza). India's largest utility vehicle manufacturer, Mahindra, too, has reported a decline in sales with 41,603 vehicles during the month of April 2019, as against 45,217 vehicles in April 2018, an eight per cent drop. This includes passenger car sales of 19,966 units this year as against 21,927 units last year. On the other hand, Tata Motors' passenger vehicles domestic sales in April 2019 at 12,694 units, witnessed a drop of 26 per cent, as compared to 17,235 units sold in April 2018. Tata mentioned the ongoing general elections as one of the reasons for low demands. Another big name in heavy commercial vehicles, Ashok Leyland clocked 10 per cent in their domestic sales numbers.
Similarly, one of India's oldest two-wheeler manufacturers, Royal Enfield posted sales of 62,879 motorcycles in the month of April 2019, against the sales of 76,187 motorcycles over the same period last year, reporting a drop of 17 per cent. Contrasting to that, Bajaj Auto sold 3,66,268 units this year, marking a five per cent growth from that of last year at 3,49,617 units. This compensated for the company's 13 per cent decline in commercial vehicle sales.
In an interview with CNBC-TV18, Rajiv Bajaj, managing director, Bajaj Auto mentioned, "The weakness that we are seeing post festive season continues and you will hear from everyone progressively, today, on how YoY there is degrowth and retails are under pressure; they are under pressure, for example, even in states like Maharashtra which had the strong festive season of Gudi Padva. So despite the positive seasonal inputs, the market for some reason continues to be soft."
Coming to the passenger car market that was hit badly in April 2019, it is being said that there are three main reasons for it. Firstly, the continuously altering fuel prices in India which have been increased rapidly over the past few months. Additionally, higher insurance costs have also discouraged many buyers. However, the reason that has been unanimously quoted by multiple sources including some of the automobile manufacturers is the ongoing general elections that are being conducted in different phases till May 19, 2019. It is being seen as a strong reason for the buyers to hold their purchase decisions due to the uncertainty of the norms that will come into effect once the new government comes into existence. It should also be noted that the last year had witnessed numerous launches which had boosted the market sentiment.
Ravi Bhatia, president, JATO India - a global automotive data insights and analytics company explained, "The automotive industry is undergoing a tough phase where multiple forces are causing severe headwinds. After a disappointing first quarter, the sales in April were disappointing once again. The sales are unlikely to improve in the near future and will remain weak for the next 12-18 months."
Ravi Bhatia, president, JATO India
He further added, "The transition to BSVI that will happen next year has imposed high regulatory burden and shock to supply chains, and OEMs are working hard to extinguish diesel sales which account for nearly 39 per cent of industry sales. This was necessitated by the high cost of upgradation. The primary focus of OEMs to manage this change with minimum asset impairment and revenue loss"
Some of the OEMs are mulling over the possibility of doing away with diesel engines completely like Maruti Suzuki who have made it official that they will discontinue diesel engines by 2020. The transition has impacted dealers, as well as they are saddled with high stocks of low-selling variants that lock their working capital. This means that they are unable to reorder high-selling variants leading to lost opportunity. The supply chains are now being modified to do this with minimum assets impairment by way of finished goods, or component inventory.
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