Will demand sustain beyond Diwali? Carmakers uncertain despite strong growth in October

Riding on hopes of bumper sales in the upcoming Diwali festivities, domestic passenger vehicle manufacturers dispatched record number of vehicles in October even as doubts remain on whether the demand will sustain beyond the festive season.

Carmakers posted a strong growth of over 17 per cent in wholesales last month compared to previous October to ensure their dealerships carry sufficient stocks for deliveries during the crucial Diwali week in the middle of this month. On the face of it, the numbers should instill confidence. Industry volumes went north of the psychological 300,000-unit mark for the first time in a month as some of the manufacturers saw their best ever performance.

Market leader Maruti Suzuki reported an over 17 per cent growth at 163,656 units while arch rival Hyundai dispatched an all-time high 56,605 units in October, over 13 per cent more than last year. Hyundai's sales tally was helped by its new launches like the Creta and Venue compact SUV as well as the new i20 that will be launched later this week.

ALSO READ: Maruti reports 17.9% growth in October; hopes of bumper sales on Diwali

"The October month sales performance has set a positive tone for overall business environment and we are confident that we will continue to strongly contribute towards sustainable growth of economy, community and all its stakeholders," said Tarun Garg, Director (Sales, Marketing & Service), Hyundai Motor India Ltd.

Homegrown auto major Tata Motors continued to be the surprise package reporting a growth of almost 80 per cent at 23,600 units. This was Tata's highest sales tally in a month since 2012 and helped it stay ahead of the new kid on the block - Kia Motors - for the third position in the market. Kia had a good run itself, with a 63 per cent jump at 21,021 units helped by the launch of its maiden compact SUV Sonet last month.

Beyond the top four, the growth was relatively muted. Mahindra and Mahindra saw a 1 per cent increase in sales, while Honda and Toyota registered an 8 per cent and 4 per cent growth in sales, respectively. For now, the companies are looking at the positive side of the story.

ALSO READ: Hyundai posts 13.2% YoY rise in Oct sales at 56,605 units; strong demand for Venue, Creta

"For Mahindra, the festive season has started on a positive note with deliveries and bookings being higher than last year," said Veejay Nakra, Chief Executive Officer, Automotive Division, M&M Ltd. "Going forward, this augurs well for a robust festive demand which in turn will help the industry in the short term."

"We have seen positive sales momentum in line with market sentiment and our October results have been as per our plan. The festive buying picked up from Navratra in mid- October and we are focussing on maximising deliveries during this period," said Rajesh Goel, Senior Vice-President and Director, Marketing & Sales, Honda Cars India Ltd.

The big question is whether the demand will sustain beyond the festivities. Nobody has a clear answer to that.

ALSO READ: Mahindra reports 14.52% dip in total sales in Oct at 44,359 units

"This month has been good and next month too sales would be decent. In December, all manufacturers push sales through offers and discounts so I do not foresee a problem during that month either. It's from January onwards that we do not know if there will be a slump in sales or whether the momentum will continue," said R C Bhargava, Chairman, Maruti Suzuki India Ltd.

"Right now, we are able to sell whatever we can produce so there is no need for a GST cut on cars immediately. If it happens now, there could be a situation when demand will outstrip production and we will not have cars to sell. Any stimulus should come next year when we have some clarity on the demand situation," he further said.