Vehicle sales drop second month in a row by 4.2 per cent

Car sales in India, Asia’s third biggest car mart, declined for a second straight month, posting 4.21 per cent dip in February, due to weak consumer sentiments, inventory corrections, disruption in supplies in northern India on account of Jat quota stir, ban on sale of larger diesel vehicles in NCR and postponed purchases in expectations of a price cut after the Budget impacted demand.

Passenger car sales stood at 1,64,469 units in February as against 1,71,703 units in the same month last year, the sales data on Thursday released by the Society of Indian Automobile Manufacturers or Siam, a trade body showed. However, overall sales of passenger vehicles, which include utility vehicles and vans went up by a meager 1.68 per cent to 2,34,154 units.

“The Jat community agitation had an impact on the industry, especially on market leader Maruti Suzuki’s dispatches. Moreover, there were inventory corrections by some of the auto manufacturers,” Sugato Sen, deputy director general at Siam told FC.

Also, some of the dealers did not pick up stock ahead of the Budget as they were expecting some reduction in excise duties that would have affected prices differently, he said.

However, the Budget, instead of reducing excise duties on passenger vehicles, imposed an infrastructure cess of 1-4 per cent on different categories of automobiles. Apart from that, it also made it compulsory to collect tax at source at the rate of 1 per cent on purchase of luxury cars exceeding Rs 10 lakh. Car sales fell by about 1 per cent for the first time in January after 14 straight months of growth to 1,68,303 units compared with 1,69,527 units in January 2015.

In February, market leader Maruti Suzuki India, which sells one out of two cars bought in the country, saw its domestic car sales decline by 3.94 per cent to 87,149 units as against 90,728 units in the same month last year. Sales at rival Hyundai Motor India also fell 12.7 per cent at 32,442 units last months as against 37,163 units sold in February last year.

Honda Cars India’s domestic sales also dropped by 15.61 per cent to 12,713 units compared with 15,065 units in the year-ago month. Tata Motors’ car sales were at 9,284 units in February, as against 11,637 units last year, down 20.21 per cent, Siam said.

However, sales at Mahindra & Mahindra, India’s largest utility vehicle maker by sales, jumped 26.99 per cent at 22,612 units as against 17,805 units in February last year.

Total two-wheeler sales in February rose 12.76 per cent to 13,62,219 units as against 12,08,084 in the year-ago period.

Motorcycle sales last month also jumped 11.05 per cent to 8,59,624 units, from 7,74,122 a year earlier. “There is a rebound in the motorcycle segment. We are seeing the rural market coming back slowly and the various measures announced in the Budget for farm sector and infrastructure should help improve the demand,” Sen said.

Sales of motorcycles at market leader Hero MotoCorp increased 10 per cent at 4,48,772 units in February as against 4,07,809 units in the same month last year. Rival Bajaj Auto also saw motorcycle sales zoom 30.47 per cent to 1,51,141 units compared with 1,15,840 units in the same month last year.

“The February vehicle sales reflect a mixed bag for automakers. Two-wheelers sales have increased and hopefully the recent budget announcements will create more demand in the rural economy,” Abdul Majeed, auto expert and partner at Price Waterhouse told FC.