Indian automobile industry under intense pressure, major companies witness sales decline in July 2019

HIGHLIGHTS

• Mahindra & Mahindra has registered a fall of 15 per cent in total monthly sales to 40,142 units in July 2019.
• The domestic sales of Honda Cars India have dived 48.67 per cent to 10,250 units in July 2019.
• TVS Motor Company has reported a sales decline of 13 per cent to 2,79,465 units in July 2019.

The major automobile companies of India today came out with their monthly sales data for July 2019 and the numbers are not at all encouraging. The prominent carmakers like Maruti Suzuki, Hyundai, Mahindra & Mahindra and Honda have all suffered a drop in their sales during the month. The case is similar with companies like TVS and Royal Enfield.

The country’s largest carmaker Maruti Suzuki India has been witnessing a decline in sales for the past six months and reported a 33.5 per cent dip in total sales to 1,09,264 units in July 2019. The cumulative sales of Hyundai Motor India fell 3.8 per cent to 57,310 units during the month.

Mahindra & Mahindra has registered a fall of 15 per cent in total monthly sales to 40,142 units in July 2019, while the domestic sales of Honda Cars India have dived 48.67 per cent to 10,250 units in the same month.

TVS Motor Company has reported a sales decline of 13 per cent to 2,79,465 units in July 2019. Royal Enfield sales fell 22 per cent to 54,185 units during the month.

“Overall economic slowdown coupled with delayed monsoon and higher monsoon deficit in few regions have impacted rural demand. Moreover, liquidity issue to some extent and inventory correction for better business viability at dealers’ end have resulted into sizable volume decline across the automobile segment,” Reliance Securities Senior Research Analyst Mitul Shah told.

“We expect the slowdown to continue in the second half of FY20. The BS-VI transformation and sharp price increase related to BS-VI would keep automobile sales under pressure during the first half of FY21, and therefore we expect any sizable revival only by mid-FY21,” Shah added.

The automobile industry was reeling under intense pressure during the first quarter of FY20 and this was proven by the data from SIAM (Society of Indian Automobile Manufacturers). While the domestic sales plunged 15.93 per cent to 20,01,096 units in April 2019, there was a drop of 8.62 per cent to 20,86,358 units in May 2019. A decline of 12.34 per cent to 19,97,952 units in domestic sales was witnessed in June 2019.

“Currently, the automobile industry is going through an unprecedented downturn as sales of new vehicles have plummeted significantly over the last several months,” SIAM President Rajan Wadhera said.

Recently, India Ratings and Research published the June 2019 edition of its credit news digest on the country’s auto sector, highlighting the trends in the sub-segments of the auto sector.

“Domestic automobile industry’s sales volume fell 12 per cent YoY in June 2019 on weak consumer sentiments owing to the slowing economy amid delays in the onset of monsoons. With rising inventory levels at dealer level, most original equipment manufacturers continued to take production cut in June 2019,” India Ratings and Research said.

“Over April-June 2019, the auto industry undertook a production cut of 11 per cent YoY on account of around 12 per cent YoY, 14 per cent YoY and 10 per cent YoY production cut in PV, CV and 2W segments, respectively,” it added.

According to a PTI report, ACMA (Automotive Component Manufacturers Association of India) has sought a uniform 18 percent GST rate across the entire auto and auto component sector for a revival. The auto component industry employs nearly 5 million people and ACMA has said that almost 10 lakh jobs could be on the line if the prolonged slowdown in the automobile industry continues.