What June’s auto sale figures say about the industry

Car sales have mostly tanked or posted minimal growth this June. An arid rural market has also hurt sales figures as people bought less utility vehicles. As shaky consumer demand affected Maruti Suzuki, Ford, General Motors, Mahindra and Nissan, only Honda, Tata Motors and Hyundai posted sizeable profits.

India’s auto market has also turned slack after interest rates on car loans refused to come down. Also some buyers are waiting for newer models to be released post July.

“While it’s important for companies to launch new models in the market, the slack numbers are a byproduct of an oversaturated market with too many options to choose from”, Automobile Expert Murad Ali Baig says.

However, some beg to differ.

“Hardly 2% Indians own cars whereas the number is as high as 60% in developed markets across the world. India still has a long way to go”, Abdul Majeed, Partner, Price Waterhouse says.

Mr. Majeed links the drooping sales to fear of the impact of sub-optimal monsoon on the rural economy and the lack of liquidity in the market as banks struggle to maintain interest rates for auto loans.

Among the few winners in June was Tata Motors which leaped 30% to 10,281 units. Its passenger cars segment grew by 44% at 8,516 units, largely led by its Bolt and Zest. Its utility vehicle segment however declined 11% to 1,765 units. Korea’s Hyundai Motors sold 36,300 units in June, an 8% leap over last year’s.

Most experts believe last year’s June sales were also driven by the GST concessions. This allowed companies to drive sales to maximize tax benefits. So what can be done to survive in the current conditions?

“India has the potential to emerge as a global export hub. It will create employment and boost consumer demands. Companies can also urge regulators for tax reforms. Our motor vehicle tax laws were designed in the 60s when it was considered to be a luxury”, Majeed says.

(Image credit: Indiatimes)