Sucheta Dalal :Auto experts see higher sales for rest of FY11
Sucheta Dalal

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Auto experts see higher sales for rest of FY11  

May 3, 2010

 There has been an increase in sale of two-wheelers and four-wheelers over the past few months. In the first month of FY11, the trend continued to be supported by mainly the availability of retail finance and industry experts see the uptick continuing during the rest of the financial year.


“This trend is likely to continue in the future. If you look at annualised growth, there is an increase over pre-2007 levels. The growth will not be as strong as it is now, but it will continue,” said a research analyst from a leading brokerage who does want to be named.


The Bharat Stage-IV norms have not affected sales as most two-wheelers and
four-wheelers are already compliant with the new emission standards.


The analyst further said that due to increased availability of finance and lower interest rates, a lot of people, who had earlier postponed their plans to buy a two- or four-wheeler, have now decided go in for purchase. “Due to the economy picking up, the main growth in car sales has been in the urban sector. On the other hand, higher crop prices and the Sixth Pay Commission’s recommendations have increased income in rural areas, which has led to increase in auto sales,” he added.


During April, Tata Motors Ltd, India’s largest vehicle maker, reported a 52% increase in sales, including exports. The company sold 57,202 vehicles compared with 37,518 vehicles sold in the same month a year ago. Maruti Suzuki, the country’s largest

carmaker, sold 93,058 units, including exports, up 29.7% from 71,748 units sold in April last year. Hyundai Motor’s total sales for April rose 17.24% at 52,020 units against 44,370 units in the year-ago period. Car manufacturing companies such as General Motors India and Ford India have also indicated an increase in sales.


Factors that will impact the sales growth in the future are the massive
under-penetration in Indian markets, aside from metros, and the non-availability of public transport. As the income and standard of living of people go up, so will the demand for cars increase.


Sandeep Singh, deputy managing director for marketing, Toyota Kirloskar Motors said, “I believe, if the interest rate in the case of retail finance continues at this level, and market sentiments remain positive, the pace of growth will continue, but may decline a little bit.”


Two-wheeler makers also reported higher sales during April. Hero Honda sold 3.71 lakh units of two-wheelers compared to 3.7 lakh in April 2009. Bajaj Auto Ltd, the country’s second largest two-wheeler maker, sold 2,79,095 units in April compared with 1,49,733 units in the same month last year. Also, the two-wheeler sales of TVS Motor Co in April rose 28% to 1,44,689 units from 113,119 units in the same period a year ago. Its domestic sales rose about 22% in April to 125,471 units from 102,985 units in the same period a year ago. Companies such as India Yamaha Motor and Suzuki Motorcycle India also showed an increase in sales of two-wheelers.


According to Sudhir Kukreja, an auto analyst, India is a place where the auto industry is expected to boom in the long term. But in the short term, there are some issues such interest rate and excise duty hikes—however, these will not impact the demand for automobiles. The demand is strong, but the impact of these factors is yet to be seen.


“The market moves on absolute figures, the high percentage growth rates are partly due to the fact that 2007 was a bad year,” he added. Mr Kukreja said that the sales of two-wheelers will be boosted by strong rural and semi-urban demand. The passenger car segment relies mainly on urban demand. A large number of global majors are entering this segment. The sales of commercial vehicles are impacted by manufacturing, mining and other such industrial activities. If the Index of Industrial Production (IIP) numbers continue to grow by 12% to 15% annually, then it will indirectly lead to higher sales.


“There are specific periods, where you will see peaks. Segment-wise, sales of commercial vehicles are influenced by depreciation cycles, which usually result in higher sales in the second quarter. Two-wheelers and passenger cars see increased sales in the festive season. Rural demand is also influenced by crop cycles,” Mr Kukreja said.

 — Moneylife Digital Team



-- Sucheta Dalal