India auto sales grow 12% in July as market sentiment improves

The sales recovery in the Indian automobile sector is underway, the green shoots having sprouted a couple of months ago. For the third month in a row, overall industry sales have been in double digits. As per the latest sales data released today by apex industry body Society of Indian Automobile Manufacturers of India (SIAM) for July 2014, overall sales numbers are 1,586,123 units, marking a growth of 12 percent over July 2013.

In what is a positive sign for carmakers, sales have risen 5.04 percent to 137,873 units last month, with total cumulative sales in the April-July 2014 period growing 2.89 percent to 582,115 units. Car sales in 2013-14 had registered a fall of 4.65 percent. 

Utility vehicle sales are also up in July, growing 18.55 percent to 44,945 units in July this year (July 2013: 37,911). Cumulative April-July 2014 UV sales constitute 173,741 units, pointing to 7.36 percent growth. Van sales however continue to be down, both month-wise and in the first four months of this fiscal. On the export front, passenger cars sales are down 5 percent in this fiscal.  

Speaking to Autocar Professional, R C Bhargava, chairman of Maruti Suzuki India, said the growth in the auto sector is closely linked to the growth of the economy and once the economy picks up, sales would also move upwards. “The new government can’t change things overnight. It will take a few months to move upwards. In terms of exports, they are based on month on month variations of shipments. Maruti is expecting to grow between 8-10 percent during 2014-15 on the back of the launch of new models. Exports will be more or less flat.”

According to Bhargava, the passenger car market will take another 6-7 months to turnaround completely. Despite the current uptick in this segment, he cautions that at best a growth of 5 percent can be expected by the end of 2014-15 and double-digit growth is unlikely.

Meanwhile, the beleaguered commercial vehicle segment continues to be bogged down by poor sales (-13.64%) albeit the rate of decline is getting slower over the past few months. In July, the M&HCV segment sold 17,799 units, down 4.36 percent over sales a year ago. LCVs saw sales of 29,966 units, down 18.35 percent over sales a year ago.

The decline in LCVs has increased in July 2014 and Abdul Majeed, partner at PricewaterhouseCoopers India, says that the CV sector will pick up slowly as the GDP improves, as they are interlinked. The service sector contributes about 25-30 percent to GDP; so once manufacturing and freight gather steam, this segment will also recover. He is optimistic that with the new government’s focus on infrastructure, the effect will be visible by Q1 or Q2 of 2015.

The two-wheeler segment, which has consistently saved the blushes for overall industry sales over the past year, continues to do well. In July 2014, it registered a growth of 13.73 percent YoY. Demand for scooter is on a high, with the segment posting 37.10 percent growth in July, while motorcycles and mopeds are up 6.17 percent and 9.36 percent respectively.

According to Sandeep Balooja, executive chairman of Mando Automotive India of the Anand Group, the growth in passenger cars should be sustainable going forward. With the government’s focus on manufacturing and introduction of new policies aimed at revival of the economy,  domestic sales will pick up albeit slowly. He concluded that with more MNC OEMs setting up international purchasing offices in India, component exports could be in for sustained growth.