Exports Help Shore Up India’s Weak Vehicle Sales in June

MUMBAI – India’s June new-car sales inched up 1.5% to 143,370 units, Ward’s data shows, but the saving grace was deliveries of utility vehicles and vans, which climbed 19.7% to 80,023, including exports, according to the Society of Indian Automobile Manufacturers.

As a result, total light-vehicle sales saw a somewhat respectable 7.4% gain for the month to 223,393 units, though pale in comparison with last year’s double-digit returns.

Honda offering 23% discount on Jazz hatchback to help clear inventory.

“The low in the passenger-vehicle segment was because of slow recovery of the European market,” which hurt India’s exports, says SIAM President Pawan Goenka. Export growth in the last fiscal year, ended March 11, rose just 1.2%.

India’s overall industry performance in June does not clearly reflect contrary market trends, where half of the leading players lost significant share, while others enjoyed a significant increase. The super-luxury-car segment performed even better.

Exports contributed some resilience, climbing 19.9% to 44,892 units in June, SIAM data shows, pushing up production 9.3%.

India’s auto makers, especially those new to the market with fuel-efficient, more-affordable models, caught the attention of buyers. This was particularly true in the utility vehicles and van segment.

Soft sales came from the traditional market-leaders Maruti Suzuki, Tata Motors, General Motors India, Ford India, Honda Siel Cars and Fiat. Their combined light-vehicle sales fell 5.1% to 144,984 units.

Maruti Suzuki suffered a triple handicap, including lost production resulting from a 13-day strike at its Manesar plant; a 3.8% decline in domestic sales; and a 32.8% plunge in exports to 10,271 units. Tata’s combined domestic and export sales slid more than 25% to 26,890.

At the opposite end of the spectrum, six auto makers saw their combined LV deliveries and exports climb 28.8% to 103,880 units: Hyundai Motor India; Mahindra & Mahindra; Toyota Kirloskar; Nissan Motor India; and Volkswagen Group, including SkodaAuto India.

Hyundai’s exports surged 17.2%, and the addition of 300 new dealerships in rural areas helped it reach a total 30,302 domestic sales in June.

Continuing high demand for light trucks pushed Mahindra & Mahindra deliveries up 29.4% to 26,103 in the month. Toyota Kirloskar nearly doubled its sales to 12,034, while Volkswagen Group deliveries soared 55.9% to 8,008.

Among the winners in the luxury-car segment, BMW sales surged 239%, Mercedes-Benz was up 46.3% and Audi was up 43.3% for a combined 1,810 units in June.

Faced with growing inventory, many auto makers are offering special incentives to move the metal.

Honda Siel now is offering a special 23% discount of on its premium Jazz (Fit) hatchback, bringing the price down to Rs5,80,000 ($12,890). A discount of Rs44,500 ($1,000) is being offered on the Honda City.

Tata, Hyundai, and Maruti Suzuki all are offering similar discounts on their hatchbacks and sedans, while SkodaAuto has lowered the price on its small cars.

Volkswagen is advancing the launch of its subcompact car, the Up, to August. The retail price now is fixed at Rs300,000-Rs500,000 ($6,660-$11,100). VW claims a fuel economy of 47 mpg (5 L/100 km) for the car.

SIAM now is lowering its 2011 sales forecast for the second time in two months to 11%-13%. Suppliers are worried about their investments at such a prospect. They suffered during the 2008 global economic slowdown and it has taken three years to increase their production. They now fear the same cycle may be repeated.

But the Indian government is taking a positive outlook. Minister for Heavy Industries Praful Patel, who met with auto makers earlier this month, is hopeful the current slowdown is temporary and the markets soon will recover.

Vishnu Mathur, SIAM’s director general, also is bullish, noting the Indian auto industry already has large investments in place.

“In 2008-2009, their total investment was Rs609 billion ($13.5 billion),” he says. “Another Rs780 billion ($17.3 billion) of new investments have been announced...and will be completed over the next two to three years.”