Auto sales sputter in April amid liquidity squeeze, poll worries

 (Mint)

New Delhi: Retail sales of motor vehicles fell 8% to 1.64 million units in April from a year earlier as uncertainty over the outcome of general elections and a liquidity squeeze hurt demand, data released by the Federation of Automobile Dealers Associations (Fada) showed.

Retail sales of passenger vehicles, an indicator of urban demand, fell by 2% to 242,457 units from 247,278 units in the year earlier.

The drop in retail sales follows an even faster decline in wholesale dispatches reported by the companies in April. Maruti Suzuki India Ltd, the country’s largest automobile maker, reported a 19% drop in sales to 133,704 units, while the second-largest, Hyundai Motor India Ltd, posted a volume decline of 10%. The third largest carmaker, Mahindra and Mahindra Ltd, reported a 9% drop in vehicle dispatches in April.

Commercial vehicle sales fell 16% to 63,360 units owing to a slowdown in economic activity, lack of availability of finance and slow transmission of interest rate reductions.

The new truck axle norms, which allow trucks to carry more freight, along with a high base effect, also had an adverse impact on retail sales of commercial vehicles.

Fada president Ashish Harsharaj Kale said that inventory has come down from the extremely high levels of January and February, but is still well above the normal 30-day period.

“The near-term outlook continues to be negative with the absence of any immediate positive triggers which could affect retail sales. Despite the subdued retail sales, which are expected to continue for the next 8-12 weeks, we still believe that the outlook for auto retail can soon turn positive if there is a stable government, healthy monsoon and easing of the liquidity situation,” added Kale.

Increased cost of ownership owing to a hike in insurance cost and subdued demand in the rural and urban areas led to a 9% year-on-year decline in sales of motorcycles and scooters to 1.29 million units in April.

New Delhi: Retail sales of motor vehicles fell 8% to 1.64 million units in April from a year earlier as uncertainty over the outcome of general elections and a liquidity squeeze hurt demand, data released by the Federation of Automobile Dealers Associations (Fada) showed.

Retail sales of passenger vehicles, an indicator of urban demand, fell by 2% to 242,457 units from 247,278 units in the year earlier.

The drop in retail sales follows an even faster decline in wholesale dispatches reported by the companies in April. Maruti Suzuki India Ltd, the country’s largest automobile maker, reported a 19% drop in sales to 133,704 units, while the second-largest, Hyundai Motor India Ltd, posted a volume decline of 10%. The third largest carmaker, Mahindra and Mahindra Ltd, reported a 9% drop in vehicle dispatches in April.

Commercial vehicle sales fell 16% to 63,360 units owing to a slowdown in economic activity, lack of availability of finance and slow transmission of interest rate reductions.

The new truck axle norms, which allow trucks to carry more freight, along with a high base effect, also had an adverse impact on retail sales of commercial vehicles.

Fada president Ashish Harsharaj Kale said that inventory has come down from the extremely high levels of January and February, but is still well above the normal 30-day period.

“The near-term outlook continues to be negative with the absence of any immediate positive triggers which could affect retail sales. Despite the subdued retail sales, which are expected to continue for the next 8-12 weeks, we still believe that the outlook for auto retail can soon turn positive if there is a stable government, healthy monsoon and easing of the liquidity situation,” added Kale.

Increased cost of ownership owing to a hike in insurance cost and subdued demand in the rural and urban areas led to a 9% year-on-year decline in sales of motorcycles and scooters to 1.29 million units in April.

According to a survey conducted by Fada among its members, average inventory with passenger vehicle dealers is still above the 30-day period and ranges between 40 and 45 days, while the same for two-wheelers have come down to 40-45 days from 85-90 days in February. Average stocks of commercial vehicles with dealers are also in the same range.

According to a statement issued by Fada, most of the vehicle categories reported a decline in sales due to the high base effect in the year-earlier period.

Thirty-nine percent of the members of the lobby group are of the opinion that the current liquidity scenario is quite bad for retail business while 47% think the situation is neither negative nor positive, the survey found.

“The liquidity situation has eased for customers compared to what we had experienced since the bankruptcy announcement of IL&FS (Infrastructure Leasing and Financial Services Ltd) but for the dealers it is still very tough. We want to reduce the inventory to 21 days going forward, since that will help improve our financials,” added Kale.

On a sequential basis, passenger vehicle retail sales decreased by 4% while commercial vehicles increased by 2%. Two-wheeler sales also registered a drop of 4% on a month-on-month basis.

[“source=livemint”]