Cars, bikes, trucks still driving in the slow lane; here’s how year 2019 may end for auto industry

• By Pratishtha Nangia

A rather tough year for Indian automobile industry, witnessing the steepest decline in the last two decades is unlikely to end on a positive note, with car, bike and truck sales remaining subdued in December as well. Brokerage firm Nomura said in a research note that passenger vehicle sales may have grown only slightly in December, while two-wheeler sales might have actually slightly fallen. “Our industry interactions indicate that retail sales have declined in December, post some growth in Oct/Nov, which is a negative,” Nomura said in the note. Further, the automobile companies would not build up dealer inventories due to the upcoming new year and impending BS-6 shift in April 2020, Nomura said.

Passenger vehicles are estimated to report a 2 per cent on-year sales growth in December, while two-wheelers are expected to fall 1 per cent. Commercial vehicle sales would continue to take big knock, likely falling 33 per cent in the month.

The uptick in the passenger vehicle sales in December, however, may not be such cheerful news. “The spike expected in passenger vehicle sales in the month of December is transitory and only happened on the back of high year-end discounts,” Nikunj Sanghi, dealer, JS Fourwheels and Vice President, ASDC, told Financial Express Online. Moreover, the uptick in car sales was witnessed only in some states.

Another institutional equities brokerage, Nirmal Bang too expects a sequential decline in auto companies’ sales volume in December 2019 on account of seasonality, year-end shutdowns and inventory management ahead of transition to BS-VI. “We expect PV dispatches to remain subdued as OEMs look to manage BS-IV inventory,” said Nirmal Bang. As per the report, two-wheeler volumes are likely to remain on down track, reflecting weak sentiments amid rural slowdown.

Postponement of sales in the hope of higher discounts ahead of BS-VI transition also seems to have contributed to weak demand for two-wheelers, as consumer offers failed to pick up in December. Further, M&HCV segment sales continued to remain weak with no pick-up in demand even from infrastructure segment, said Prabhudas Lilladher.

Meanwhile, tractor demand is also expected to remain under pressure led by excess monsoon in various parts adversely impacting the local crops. Going forward, auto sales will continue to face headwinds with impending sharp price hikes of 13-15 per cent for BS-IV models from April 2020.

Source: Financial Express