Festival Demand Eludes India’s Top Auto Makers

November 2, 2013 Leave a comment

Festival Demand Eludes India’s Top Auto Makers

October Sales Increase Marginally at Maruti and Hyundai Unit, Fall at Tata Motors and Mahindra

SANTANU CHOUDHURY

Updated Nov. 1, 2013 11:05 a.m. ET

NEW DELHI—India’s ongoing festival season has failed to enliven the automobile market as the country’s top auto makers posted lower or nearly flat sales in October. Maruti Suzuki India Ltd. 532500.BY +0.28% and the local unit of Hyundai Motor Co., the country’s largest car makers by sales, Friday reported marginal increase in sales from October last year. At Tata Motors Ltd. 500570.BY +0.91% and Mahindra & Mahindra Ltd.500520.BY +2.03% , sales fell in the past month.Companies and analysts blame prevailing high ownership costs and a sluggish economy for the subdued performance in the auto sector.

Car sales in India fell 6.7% in the fiscal year ended March 31 to 1.9 million units, the first decline in annual sales in a decade. In the first half of this fiscal year, sales fell 4.7% to 855,318 units, the sharpest drop since a 7% fall in the same period of 2002, according to the Society of Indian Automobile Manufacturers.

In September, the industry group forecast local car sales to drop this financial year through March, scaling down an earlier estimate of 3%-5% growth. It didn’t specify how much it expects sales to decline.

According to analysts and auto-industry executives, consumers are putting off purchases because of the fear of job losses in a slowing economy, as well as higher interest rates and increasing fuel costs that are adding to the cost of owning a vehicle.

While the economy is growing at its slowest pace in a decade, accelerating inflation has led the central bank to raise its main lending rate twice in as many months, with the latest quarter-percentage-point increase coming earlier this week.

Maruti said the company’s sales rose 0.1% in October-its slowest pace this fiscal year—to 96,062 vehicles. Exports recorded a much healthier 27% increase at 9,025 vehicles.

Local sales at Hyundai Motor India Ltd. increased 0.6% to 36,002 vehicles. Exports fell 38% to 14,210.

The performance of Maruti and Hyundai is an indicator of car demand in India as they produce a total of 13 small car and van models. Small cars comprise about two-thirds of India’s passenger-car market.

Still, Maruti Managing Director Kenichi Ayukawa said Monday that the company is confident it can outperform the Indian car market and post an increase in sales this financial year. He didn’t give any specific targets.

Local car and sport-utility vehicles at Tata Motors plunged 33% year-over-year in October to 14,133 units. Sales of SUVs and the Verito range of cars at Mahindra fell 15% to 22,924 autos.

Analysts expect car sales in India will remain weak this year.

“November is expected to be slightly better due to Diwali but I don’t see any signs of improvement in the remaining months of this year,” said Umesh Karne, auto analyst at Brics Securities Ltd.

India’s majority Hindus consider it auspicious to make new purchases, such as of cars and apartments, during festivals. This year, the festival season began in September, and the main Hindu festival of Diwali takes place Sunday.

The local units of Honda Motor Co. 7267.TO +0.38% , Ford Motor Co. F -1.29% , Toyota Motor Corp. and General Motors Co. GM +1.19% , however, posted higher sales in India during October, driven largely by new models.

Honda recorded a 39% increase at 11,214 vehicles. The company’s Amaze compact car comprised 9,564 units of the total.

At Ford India Pvt. Ltd., local sales jumped 21% to 9,163 vehicles due to demand for the recently launched EcoSport compact SUV. Ford’s exports surged 71% to 5,772 vehicles.

India sales increased 7.2% at Toyota Kirloskar Motor Pvt. Ltd. to 13,162 units. General Motors India Pvt. Ltd. posted 14% growth in October sales at 7,715 vehicles.

Filed under Macro Trends

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