Demonetisation dented the much ambitious drive of the automobile industry to achieve three-million passenger car sales in 2016. However, the slow recovery in sales in January could mean that the target is reached in fiscal 2017, says a top Society of Indian Automobile Manufacturers (Siam) functionary.
Passenger car sales, at 2.96 million, missed the target by a whisker in 2016, but the 14.4 per cent sales growth to 2,65,000 lakh units in January will surely help the industry breach the 3-million annual sales mark in the fiscal. The April-January passenger cars growth stood at 9.17 per cent, keeping alive the chances of double digit growth for FY17.
"Sales are back on track. Retails have improved. Companies will be looking at better demand in February and March, which should ideally help us to take us beyond the record of 30 lakh cars by the end of next month," says Vishnu Mathur, director general of Siam.
Weak performance of the domestic two wheeler market continued to pull down the volumes of the automobile industry in January, a lingering impact of demonetisation. Over seven per cent drop in two wheelers led to the total automobiles market shrinking by 4.71 per cent (passenger and commercial vehicles, two and three wheelers) last month.
However it was far better than December, when overall automobile sales declined more than 18 per cent on a 22 per cent slump in two wheeler volumes. But except passenger cars (cars, vans and utility vehicles), all segments of the industry showed a decline or remained flat in January, as per Siam data.
The double digit growth in passenger cars came from a number of companies, including market leaders Maruti Suzuki and Hyundai. This is the most important segment of the industry in terms of value.
The market was mainly hit by declining two wheelers sales, which form around 80 per cent of the domestic industry's volumes. The decline in scooters -- a fast growing segment prior to demonetisation -- was steep at 14.5 per cent. Motorcycle sales were also under pressure and volumes dipped 6 per cent. The leading two wheeler makers in the country -- Hero MotoCorp, Yamaha and Bajaj Auto -- saw a double digit drop in volumes last month.
Commercial vehicle sales in the domestic market saw a marginal decline of 0.72 per cent last month. It was largely due to a 2 per cent drop in light commercial vehicles (LCVs) even as medium and heavy commercial vehicles (M&HCVs) grew 0.61 per cent.
Abdul Majeed, Partner and National Auto Practice Leader at PwC, attributed the increase in passenger vehicle sales last month to higher dispatches of new models (Maruti Baleno and Hyundai Creta) that have long waiting periods. "Despite a consistent demand for cars, two wheeler and commercial vehicles segment have been impacted by demonetisation, especially in the rural markets. The customers are cautious with their spending because of the uncertainties pertaining to the growth of the economy as well as the implementation of GST, where tax rates are undecided. This quarter will be challenging for the overall growth of the automotive industry, but is expected to pick up in Q3 2017".
Vishnu Mathur expects a pick up in commercial vehicles in February-March, since new purchases are done to claim depreciation benefits. "Moreover, there will be significant advancement of purchases, especially in M&HCVs as commercial vehicles shift to BS IV emission norms from April and prices will accordingly move up. There will be some advanced purchases," he said.
The three wheelers market has also remained under pressure post-demonetisation. January sales declined over 28 per cent to 31,345 vehicles.