Slowdown Blues: No bumper festive season for auto industry but declining trend may be arrested

The balloons and ribbons are in place and the festive lights are fixed but the usual exuberance in the run-up to the festive seasons at automobile showrooms across the country is missing this year. The mood of cautious optimism is more sombre. Following 11 straight months of decline in what has been the worst ever stretch for the domestic passenger car industry, the caution is understandable. From a month-on-month basis, there has been an uptick, both in enquiries and actual sales -- September was better than August and October so far has been better than September -- but with Navratri out of the way, what is certain is that a bumper festive season is missing.

"Sales in October this year will be comparable to what we did last year," says RC Bhargava, Chairman, Maruti Suzuki India Ltd, India's largest passenger vehicle maker. "Last year, the festive season was split between October and November so it is not a like-to-like comparison. But, it is a relief that we can, maybe, see a flat or some growth this month."

Bhargava hastened to add that if the festive season as a whole were to be compared to last year, sales would be either flat or with some marginal growth. That itself is some reason to cheer for a company that has seen sales plummet by 24 per cent in the first half of this fiscal -- April September 2019 over 2018. For the industry as a whole, the decline has been a similar 23.6 per cent.

"This is on the back of record discounts and promotion offers. In the second quarter (July-September 2019), we offered an average discount of Rs 25,000 per vehicle against Rs 18,000 last year. That is a growth of 40 per cent, which is substantial. In October, the discounts are a shade higher than Rs 25,000," he said. "Both in retail and wholesale, October looks okay but that does not mean we are out of the woods yet. It is still too early to tell if it is a turnaround."

Typically, the 42 days festive period between Navratri and end of Diwali every year brings in about 25 per cent of industry volumes for cars and two-wheelers in India. Last year, the industry witnessed its worst festive period in 5 years as retail sale of passenger vehicles had declined by 14 per cent for passenger vehicles and 12 per cent for two-wheelers. Matching the same volumes would still mean a low key festive season but no decline could be an indication that the worst of the times maybe behind.

"With the onset of Navratri from 29th-30th September, the customer walk-in and orders have been encouraging. We have seen a positive momentum and expect more retail conversions by Dhanteras (Friday), which is an auspicious time across India," says N Raja, Deputy Managing Director, Toyota Kirloskar Motor. "The industry expects improvement in customer demand in October with Dussehra and Diwali festive cheer. We hope this pace in retail sales continues beyond the festive season."

"Compared to September, there is a definite recovery in October. We expect the industry as a whole to grow by 16 per cent compared to September 2019," says Vikas Jain, National Sales Head, Hyundai Motor India Ltd. "We expect sales of 10,000 deliveries on Dhanteras across the country."

Should Hyundai achieve that on Friday, it would still be lower than the record 15,153 cars it delivered on Dhanteras in 2016, but it would be better than what it did in each of the next two years.

The sentiment in the two-wheeler industry is more downcast. With higher exposure to rural markets, which have in the last few months performed worse than urban centres, the motorcycle industry is a bit more circumspect. "Our retail sales during the ongoing festive season have been quite steady so far, thanks to the new motorcycles and scooters that we have launched recently. We hope to keep up the momentum during Dhanteras and Diwali festivals," says Niranjan Gupta, Chief Financial Officer, Hero MotoCorp.

Dealers say the problem is less with enquiries and footfalls now and more with conversion into deals. "We have been busy. Enquiries have picked up and walk-ins have also increased," said an executive with a Honda Motorcycle and Scooters India dealer in Delhi.

"The problem is not enough enquiries are getting converted into deals. We will deliver a sizeable number of vehicles on Friday but a number of them are old bookings."

"The festive season so far has been good for passenger vehicles. It may turn out to be a nominal growth or similar to last year's Dhanteras/Diwali. The demand is lower in vehicles that cost below Rs 6 lakh," says Vinkesh Gulati, Vice President, Federation of Automotive Dealers Association.

"For two-wheelers, it has not been that great. Rural sales continue to be bad. The saving grace is that the last year was also bad, so the de-growth should be in the range of 2-5 per cent."

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