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Passenger vehicle sales increase 16.7%, bike sales up 22% in August

Livemint:  September 09, 2016

New Delhi: Sales of passenger vehicles, including cars, grew 16.7% to 258,000 in August from the year-ago period.

Sales of motorcycles, a key indicator of spending in rural India, grew the fastest since November 2011.

Motorcycle sales grew 22% to 1 million units while overall two-wheeler sales grew 26.3% to 1.64 million units.

The increase in demand for automobiles in the country has prompted the Society of Indian Automobile Manufacturers (Siam) to revise its growth projections. The lobby group now expects the passenger vehicle industry to grow in the range of 11-13% in FY2017, as against an earlier forecast of 6-8%.

The optimism about growth prospects was evident at a two-day conference organised by Siam and another lobby group Auto Component Manufacturers Association that concluded on 31 August. The days of gloom seem to have ended, industry executives said at the conference.

They cited better-than-expected monsoon, strong buying sentiment and an increase in salaries for government employees as reasons for their optimism.

“Industry has started performing better with demand picking up. Going ahead, there will be a further improvement in the performance in all segments,” said Sugato Sen, deputy director general, Siam.

Good rainfall is expected to boost farm output and improve demand for goods ranging from motorcycles to smartphones and tractors. Improved rural consumption will increase gross domestic product by as much as a percentage point in the fastest-growing major economy in the world, according to estimates by CLSA Asia-Pacific Markets.

The state-run India Meteorological Department and private forecaster Skymet Weather Services Pvt. Ltd have forecast above-normal rain during the June-September monsoon season after two consecutive years of drought.

“Except for the M&HCV (medium and heavy commercial vehicle) segment, all other segments have done well. Most encouraging is that motorcycle sales have really picked up,” Sen said, adding that demand from rural markets “will now extend to small car buying” and its impact will be visible during the festive season.

Sales of M&HCV fell 10.8% to 20,537 units. Overall the commercial vehicle segment grew 1.53% to 52,996 units.

Demand in M&HCV segment tapered off as freight demand has not increased to support new purchases, according to Abdul Majeed, partner and national auto practice leader at PricewaterhouseCoopers.

“Also there is a bit of uncertainty amongst fleet owners with regard to the overall GST (goods and services tax) impact on freight movement in the country. This segment will remain under pressure till we see overall sustainable development across the different segment in the economy as well as once it becomes clear how GST will impact freight movement and demand post implementation,” Majeed said.

He said that new product launches will play an important role in driving growth in the Indian automotive industry as product shelf life will keep decreasing with rising customer expectation of the overall product experience.

Though the uncertainty around diesel vehicles has been cleared, consumer confidence is unlikely to return soon; meanwhile, petrol vehicle demand is bound to rise, he said. “On the flip side, if inflation goes up, and overall economic activity is not sustainable, then this will have an impact on the sales after the festive season,” Majeed added.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.