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Vehicle demand set to slump
BS Reporter in Mumbai
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June 11, 2008 10:26 IST

Despite a 14.25 per cent growth in May automobile sales, demand in the subsequent months is likely to slide due to rising interest rates, steep fuel costs and the onset of monsoon predict industry experts.

According to figures released by the Society of Indian Automobile Manufacturers on Tuesday, more than 1.10 lakh units were sold thanks to demand for small cars of market leaders Maruti [Get Quote] Suzuki and Hyundai Motors. Sales in the corresponding month last year stood at 96,923 units.

The growth during the month, which was attributable to buying in anticipation of price hikes, may not last beyond the current month as most leading manufacturers have already increased prices, said analysts.

Dilip Chenoy, director general, Siam, said, "The sales numbers are according to our expectation but the challenge will be to sustain the rate of growth. The real issue that needs to be addressed in the industry is the availability of finance, only on the basis of which there can be revival in the coming months."  

The passenger vehicle segment was also assisted by strong demand for utility vehicles like Tata Safari, Mahindra Scorpio (25 per cent) and multi-purpose vehicles (27 per cent), such as Chevrolet Tavera and Toyota Innova. Sales in the segment (cars, utility and multi-purpose vehicle) grew by 16.58 per cent at 141,946 units as compared with 121,753 in 2007.     

During the month, India's largest car maker Maruti Suzuki posted a growth of 14 per cent, on par with the industry standard.

The company, which commands a market share of 58 per cent as of May,  witnessed the demand for its cheapest car- Maruti 800 -- grow by 25 per cent in addition to demand for the Wagon R LPG.

Hyundai Motors, which sold less than half of the total units sold by Maruti Suzuki, saw sales jump by 47 per cent courtesy the i10, which is one of the country's largest selling compact car model. Hyundai has a market share of 22 per cent in the domestic market.

"The reason behind the 14 per cent-plus growth is a low base last year. Besides, newer models of Maruti, Hyundai and General Motors have done well," Piyush Parag, analyst, Religare Securities, said.

Maruti Suzuki, Hyundai, General Motors and Tata Motors [Get Quote] have lined up various models for this year.  

Tata Motors will launch more than three new models before the end of the fiscal while Maruti and Hyundai have promised new models and variant launches, as well. 

Two-wheeler makers Hero Honda and Bajaj Auto [Get Quote] witnessed a growth of more than 8 per cent in sales of motorcycles owing to better product lines from market leader Hero Honda and special finance packages dolled out by Bajaj Auto, respectively.

"The growth of two-wheelers during May was notably good and in line with our expectations. There are a growing number of non-performing assets in the two-wheeler industry that have prompted stricter lending norms. Growth in the next few months should be flat to marginal," added Parag.

The market for motorcycles grew 7.38 per cent at 5.13 lakh as agianst 4.77 lakh last year in May. The growth was bettered by the automatic scooter segment, which saw a rise of 6 per cent at 97,905 units. Total sales in the two-wheeler segment stood at 6.47 lakh, up by 7 per cent as compared with 6.05 lakh.

Hero Honda, the world's largest two wheeler maker, registered a growth of 9.54 per cent selling more than 3.12 lakh motorcycles, while Pune-based Bajaj Auto posted an increase of 8 per cent in sales with a 1.79 lakh total. Hero Honda's market share in May stood at 61 per cent while that of Bajaj Auto stood at 35 per cent.

Commercial vehicle segment grew by 6.10 per cent with sales of 35,294 units in May as against 33,262 units in the same month a year ago. Three-wheelers sales fell by 2.54 per cent at 28,274 units as against 29,012 units.  

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