Auto Sales decline in December on weak consumer demand: Ind-Ra

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Biznextindia : After a brief recovery in the October-November festive season, domestic automobile sales declined sharply in December on weak consumer sentiments. In fact, most of the consumers are preferring to wait for new launches and for Barat Stage VI to kick in from April 2020, analyzed India Ratings and Research (Ind-Ra) in its credit news digest on India’s auto sector.

“Domestic retail automobile sales volumes saw a sharp decline in December 2019, after a brief recovery in October and November 2019. Heavy discounts were not enough to improve consumer sentiments, as buyers showed preference to wait for new launches and for Barat Stage VI to kick in from April 2020. PV, CV and 2W retail sales fell 9%, 21% and 16% yoy, respectively, in December 2019. At the original equipment manufacturers (OEM) level, overall sales volume fell 16% yoy in December 2019, recording the lowest sales in 2019, on decreased demand amid weaker consumer sentiments” said Ind-Ra.

Existing inventory at the dealership level led to most OEMs continuing to implement production cuts in December 2019. Over April-December 2019, the auto industry undertook an overall production cut of 13% yoy; this translates to around 14%, 27% and 13% yoy production cuts in the PV, CV and 2W segments, respectively. The average inventory for PVs decreased to 20-25 days in December 2019 from 25-30 days in November 2019, on sustained retail sales especially for utility vehicles. The average inventory for CVs and 2Ws decreased to 30-35 days in December 2019 from 35-40 days in November 2019.

In December 2019, PV sales volume at the OEM level fell 1% yoy, on account of an 8% yoy decline in the sales volume of cars. Utility vehicle sales volume continued the growth momentum with a 30% yoy increase. More alarmingly, retail sales’ brief recovery was stunted with a 9% yoy decline in December 2019, despite attractive discounts and offers. CV sales volume at the OEM level declined 12% yoy in December 2019, on a 32% yoy drop in the sales volume of medium and heavy commercial vehicles. Retail CV sales also declined 21% yoy in December 2019, impacted by delayed purchases, resulting from weak customer sentiments amid a demand slowdown. Light CVs sales volume grew 1% yoy in December 2019. 2W sales volume at the OEM level dropped 17% yoy in December 2019, on a sharp 25% yoy and 12% yoy drop in scooters and motorcycles sales volumes, respectively. Retail 2W sales fell 16% yoy in December 2019.

In the PV segment, Maruti Suzuki India Ltd’s market share remained at a similar level of 50% in December 2019. Tata Motors Limited’s CV market share of 47% in December 2019 was up by 1% yoy, while Mahindra & Mahindra Ltd (‘IND AAA’/Stable) gained a 2% yoy market share. The 2W market leader Hero MotoCorp Ltd’s market share increased 4% yoy to 39% in December 2019.

Regulated wholesale billing by OEMs in October and November 2019 had resulted in lower inventory at the dealership level across PVs, CVs, and 2Ws. However, with retail demand plummeting in December 2019, Ind-Ra expects dealership inventory to have marginally increased in January 2020. With existing inventory at the dealership level still higher than the 21 days recommended by the Federation of Automobile Dealers Associations, the production cuts by OEMs are likely to continue in the near-term.

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