WITNESSING ITS worst run ever, domestic passenger car sales fell for the eighth consecutive month, with June 2019 numbers falling by 17.54 per cent to 2,25,732 units from 2,73,748 units in the same month last year.
Passenger vehicle sales have witnessed a fall in 11 out of the last 12 months with October 2018 being the only exception with marginal expansion. The decline was across the board with both two-wheeler and car sales witnessing a double-digit decline.
Credit holds key
The SLIDE is a result of sluggish demand and liquidity crunch faced by NBFC financiers. This has made automakers announce temporary factory closures to trim mounting stocks. Recovery will mainly depend on credit availability.
According to data released by Society of Indian Automobile Manufacturers (SIAM), passenger car sales fell 24.97 per cent in this month, and two-wheeler sales by 11.69 per cent. Commercial vehicle sales declined 12.3 per cent in June, while three-wheeler sales fell by 8.8 per cent.
Overall, vehicle sales across categories registered a decline of 12.34 per cent to 19,97,952 units from 22,79,186 units in June 2018.
The first quarter of the current financial year has come as a big disappointment for the industry as the sale of passenger vehicles declined by 18.42 per cent between April and June 2019. Data shows that it has been the worst quarter for the industry in the last 18 years since Q3 of 2001-02, when sales fell 27 per cent.
Within the passenger vehicles segment, sales for passenger cars, utility vehicles and vans declined by 23.32 per cent, 4.53 per cent and 25.66 per cent, respectively, during the quarter.
While the slowdown started last July, it intensified following the IL&FS crisis that resulted in a liquidity squeeze in the market. With pressure mounting on NBFCs since February 2019, credit availability to consumers has gone down significantly in large and smaller cities, leading to a sharper fall in car sales numbers, according to the chief of a leading car manufacturer.
Rajan Wadhera, SIAM president, told reporters that the industry has not seen this kind of slowdown ever. While he said that there was belief that growth will return eventually, he pointed out that the situation looks more grim now. “This is worrying… the de-growth may intensify further,” said Wadhera, who had hoped for a Budget proposal on GST reduction to enable growth for the sector.
Speaking earlier to The Indian Express, S S Kim, MD and CEO, Hyundai Motors India Ltd said that the industry is facing a credit crunch from the banks. “A lot of dealers are suffering from reduced fund availability… On the customers side, if loan was easily available to new car buyers earlier, now that has become tough,” said Kim.
He added that without improvement in the bank lending situation, the new car demand will be very limited.
Exports were slightly better during the quarter as overall automobile exports grew 0.16 per cent. Exports of passenger vehicles and two-wheelers grew 3.55 per cent and 3.12 per cent, respectively.