October auto sales: Festive season pulls auto industry out of red but the joy could be short-lived

A mild recovery in the festive season this year saw the domestic passenger vehicle industry post a first monthly growth in almost a year in October 2019.

Industry volumes collated from the top 11 passenger vehicle makers that released their figures on Friday pointed to a marginal 1.5 per cent growth last month at 280,418 units against 276,398 units last year. The growth however is far from homogenous and bulk of the heavy lifting was done by market leader Maruti Suzuki, Renault India, and the two new entrants - Kia and MG Motors. Maruti, Renault and Volkswagen were the only three companies to register a year-on-year growth during the month.

The market leader registered a 2.3 per cent growth in dispatches of its passenger vehicles to its dealers. It was the first monthly growth for the company since February and in absolute terms, sales of 139,121 units were the highest in a month since March. French automaker Renault, that recently launched a sub-4-metre 7-seater Triber, posted a 63 per cent growth in sales at 11,516 units, while Volkswagen had a flat month with sales of 3,213 units against 3,191 units of October 2018. Kia Motors and MG Motors between themselves brought in incremental volumes of over 16,000 units helping the industry post an overall growth.

The return to black however may not signal a sustainable turnaround in the market. The industry benefited in October from both festivals - Dussehra and Diwali, falling in the same month. Last year, sales got split between the two months as Diwali was in November.

ALSO READ: Maruti Suzuki posts growth for first time since February, reports 2.3% rise in October sales

"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," Maruti chairman R C Bhargava had said last week. "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."    

The other players in the market did not have a very good outing last month. Hyundai registered a near 4 per cent decline in sales while Mahindra, Tata, Honda and Ford witnessed a steeper 23.3, 28, 29.4 and 22.4 per cent fall over October 2018. Toyota also registered a near 6 per cent decline. Manufacturers however said off-take of cars at dealers was much better during the month indicating that the low dispatch during the month signalled an effort at clearing the inventory.

"In line with our new paradigm, focus was on retail. Results have been encouraging with retails at 36 per cent more than wholesale," said Mayank Pareek, President, Passenger Vehicles Business Unit, Tata Motors Ltd. "In October retail sales were the highest in this fiscal recording a 70 per cent increase month-on-month. In this fiscal, network stock has been reduced by 38 per cent. October-end network stock is the lowest in last two years. This will help our network to be prepared for a smooth BS6 transition. Our endeavour is to enhance the retail capability by continuously adding new sales outlets and executives. We remain optimistic that the positive sentiments of the festive season will lead to a structural recovery in the market."

ALSO READ: Hyundai sales dip 2% to 63,610 units in October

Mahindra and Mahindra also said its retail numbers were much higher than wholesales.

"The festive month of October 2019 was excellent for Mahindra, with retail volume exceeding wholesale by approximately 40 per cent. This robust retail performance was contributed by both passenger and commercial vehicles," said Veejay Ram Nakra, Chief of Sales and Marketing, Automotive Division, M&M Ltd. "Further, our billing numbers are in line with what we had planned for the month, since the objective was to significantly correct our channel inventory. We hope to see the positive consumer sentiment continue going forward."