Automakers Expect Slowdown To Continue Till September

Auto sales failed to pick up in April and makers of cars and two-wheelers expect the slowdown to continue till at least September.

“The first half of the current financial year is expected to be weak,” RC Bhargava, chairman of Maruti Suzuki India Ltd., India's largest carmaker, told BloombergQuint. “The second half, however, could see growth on the back of expected pre-buying due to the implementation of BS-VI emission norms, which may push up prices of cars.”

That provides little solace to the industry struggling to push up sales since September last year. Inventory started piling up at dealerships as sales remained muted, with higher fuel prices and increased upfront insurance costs keeping buyers away. Year-end discounts didn't lift demand, forcing car and two-wheeler makers to cut production.

Maruti Suzuki's sales rose 4.7 percent in 2018-19 compared with the scaled-down target of 8 percent during the period. And it forecast a lower-than-expected 4-8 percent volume growth in the ongoing financial year. CLSA had estimated 10.8 percent.

Still, Hero MotoCorp Ltd. and TVS Motor Company Ltd. share Bhargava's optimism about better demand in the second half.

Sanjay Bhan, head (sales and after-sales) at Hero MotoCorp, said in a conference call with analysts that the company expects a mid-single digit growth for FY20 and will try and do better than the industry. The inventory levels have fallen to 45-50 days at dealerships, he said. It had risen to as high as 90 days.

TVS Motor is also banking on pre-buying ahead of the new emission and safety emission norms and the Diwali festive season to boost sales.

Poor April

Wholesales or factory dispatches remained sluggish in April—usually when demand picks up because of weddings and festive buying to mark Gudi Padwa and Baisakhi.

• Maruti Suzuki's sales declined 17 percent in April, largely due to a 22 percent fall in despatches of mini and compact cars. Sales of its premium sedan Ciaz also fell 45 percent from the year-ago period.

• Hero MotoCorp's sales fell 17.2 percent year-on-year in April.
• Royal Enfield's volumes also declined 17 percent because of slowing demand, especially in south India.
• TVS Motor Company and Bajaj Auto Ltd., however, bucked the trend. Their domestic sales rose 3 percent each in April.
• Tractor sales, too, fell last month. While market leader Mahindra & Mahindra Ltd. reported a decline of 8 percent, while Escorts Ltd.'s volumes slumped about 15 percent. But Rajesh Jejurikar, president (farm equipment) at M&M, said a normal southwest monsoon will boost tractor demand.

April sales are weak but on expected lines, Avinash Gorakshakar, head of research at Joindre Capital Services Ltd., told BloombergQuint. The growth of most automakers in coming quarters, according to him, will depend on the inventory position at dealerships, transition to BS-VI norms and the monsoon.