Automobiles : Consumer sentiments to improve from October on govt measures, good Monsoon  : Ind-Ra

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Despite government measures to lift the consumer sentiment, domestic automobile sales has continued to fall in September also. However, the consumer sentiment is likely to improve in October onwards due to the government’s liquidity easing measures, good Monsoon and the festive season, expects India Ratings and Research (IndRa).

“ We expect the recent liquidity easing measures announced by the government on back of favourable monsoons to help improve consumer sentiments during the ongoing festive season, with retail sales likely picking up. Consequently, inventory build-up at the dealer level in anticipation of increased demand during this period is likely to lead to increased wholesale billing by the OEMs during October. However, with existing high dealer inventory levels, production cuts by OEMs are likely to continue in the near-term” said Indi-Ra  in its September edition of credit news digest on India’s auto sector.

Domestic automobile sales dropped by 22% YoY in September.  Inventory at dealer level remained high, leading to most original equipment manufacturers (OEMs) continuing to implement production cuts in September 2019. Over April-September 2019, overall auto industry undertook a production cut of 13% yoy with 16% yoy, 27% yoy and 13% yoy production cuts in PV, CV and 2W segments, respectively. In the PV segment, market leader Maruti Suzuki India Limited (Maruti) took a production cut of around 21% yoy. The average inventory for PVs increased marginally in September to 30-35 days from 25-30 days in August 2019. The average inventory for CVs decreased marginally in September to 50-55 days from 55-60 days in August 2019. The average inventory for 2W remained high at 60-65 days.

PV sales volume declined 24% yoy in September 2019 on account of a 33% yoy drop in the sales volume of cars. Cars sales volume continue to decline on weak consumer sentiments amid a slowdown in urban/rural household consumption, a rise in the cost of ownership and the growing preference of shared mobility over buying a car. CV sales volume declined 39% yoy in September 2019 owing to decreased industry demand on account of tight liquidity conditions amid slowed economic activity. 2W sales fell 22% yoy in September 2019 on weak rural and semi-urban demand.

In the PV segment, Maruti’s market share dropped by around 3% yoy to 49% in September 2019 on lower sales volumes, while Hyundai Motor India Ltd gained 2% yoy market share. TML’s CV market share dropped by around 5% yoy to 41% in September 2019, while Mahindra & Mahindra Ltd (‘IND AAA’/Stable) gained 8% yoy market share. 2W market leader Hero MotoCorp Ltd’s market share increased by around 1% yoy to 36% in September.

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