Auto sales decline by 22.4% in September but some green shoots of recovery visible

Sale of automobiles in India declined again in September by 22.41 percent, the tenth month on the trot as uncertainty over GST cut that ultimately did not happen, kept customers away from showrooms.

There was however, a perceptible uptick in demand across the country in the latter half of the month with the onset of festive season that propped up the numbers somewhat. It reversed the trend of even a sequential month on month decline that started from June this year.

Over 2 million units were dispatched to dealers by manufacturers across the country during the month. Typically, wholesales are higher during September as dealerships stock up in anticipation of a robust festive season in October and November.

The worst hit has been passenger vehicle segment that saw its 11th straight monthly decline. Moreover, the segment has seen a drop in 14 out of the last 15 months. In September, sales declined by 23.7 percent at just 223,317 units. Car sales declined by 33.4 percent, while sale of utility vehicles and SUVs managed to grow by 5.5 percent, helped by new launches like the Hyundai Venue, MG Hector, Kia Seltos and Tata Harrier.

"There are some green shoots visible and we can say with certainty that the consumer sentiment has improved with the onset of the festive season," said Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM). "We still cannot say that the worst is over though all indications suggest that going forward there will not be a worst case scenario. Consumers are inclined to spend more during festivities and with the bountiful monsoons that we have had this year, there should be a revival in rural demand as well. We are hopeful that this will lead to a sustainable turnaround in the industry."

SUVs buck trend

Nevertheless, all major car makers saw high double digit decline during the month. Maruti Suzuki saw a 27 percent drop, while arch rival Hyundai registered a 14.8 percent drop. Tata Motors witnessed the heaviest drop at 56 percent followed by Nissan at 55.6 percent, Honda at 37 percent, Ford at 32.5 percent and Mahindra at 28 percent. The only company to buck the trend in the month was Renault, which posted a 29 percent growth but that was on a small base and on the back of an entirely refreshed line up of cars including new Duster, Triber and the new Kwid.

Other segments fared no better. Commercial vehicle segment that is considered a true barometer of the overall economy saw its sales decline by 39.06 percent while the distress in the rural economy was highlighted by the 22.09 percent slide in sale of two wheelers. Sale of motorcycles declined by 23.3 percent while scooters were down 16.6 percent during the month.

Two-wheeler sales

The last time commercial vehicle sales had declined by a faster clip in a month was more than a decade ago in January 2009 when sales declined by 58.34 percent. For two wheelers, the decline was only marginally better than the 22.24 percent drop registered in August 2019, which was its worst decline ever in a month. The previous worst for two wheelers was in the aftermath of demonetisation in December 2016, when the dip was 22.04 percent.

For the fiscal so far, overall sale of automobiles has declined by 17.08 percent at 11,736,976 units. Passenger vehicles are down 23.56 percent at 13,33,251 units, commercial vehicles down by 22.95 percent at 375,480 units and two wheelers at 9,696,733 units, 14.85 percent less than last year.

The slowdown in the industry is largely on account of a bad festive season last year which led to the problem of higher inventories, tight liquidity with banks as a fallout of the NBFC crisis and an overall sluggish economy and low consumer sentiment. As many as 280 dealerships have shut shop in the last 18 months due to the slow off-take of vehicles. Another industry that is facing the brunt is the ancillary sector that is totally dependent on the performance of the original equipment manufacturers. Experts say almost 10 lakh jobs are in danger if the slowdown persists beyond the next few months.

Cumulatively, the $119 bn automobile industry in India supports 37 million people directly or indirectly and accounts for 7.1 percent of the country's GDP and 49 percent of its manufacturing GDP.

Also read: Slowdown Blues: Car sales crash 29% in August; all eyes on Sep 20 GST meet

Also read: Auto sector slowdown: Passenger vehicle sales down 24% in September; commercial vehicle sales dip 62%