India Car Sales Show Fitful Upturn; Light Trucks Lag

MUMBAI – New products reflecting quicker responses to changing customer preferences are helping India’s auto industry show signs of recovery after two difficult years.

New-car sales jumped 14.7% in June compared with year-ago, WardsAuto data shows. That eased the decline in the first six months of the year to 1.1%, based on 946,008 deliveries.

Light-truck sales have not seen such a recovery. Deliveries in June fell 3.3% year-on-year to 92,131, only slightly tempering a 14.4% contraction to 92,131 first-half sales.

The boost in car sales lifted overall June light-vehicle deliveries 7.5% compared with like-2013, but the year-to-date total was down 6.5%. That deficit, however, was tracking ahead of full-year 2013, when LV sales finished 7.7% behind prior-year.

Car sales’ return to positive territory comes as customer interest shifts from entry-level and midsize small hatchbacks to premium hatchbacks and entry-level sedans.

Society of Indian Automobile Manufacturers data indicates sales of entry-level and midsize hatchbacks have fallen more than 33% in the 2013-2014 fiscal year from 1,191,927 in fiscal 2010-2011, while deliveries of premium hatchbacks and entry-level sedans have climbed more than 40% from 833,818 in the same period.

Smaller automakers such as Honda India (Amaze and City), Nissan India (Datsun Go and Terrano) and Ford India (EcoSport and facelifted Figo) have changed their focus and seen their combined sales soar 64.6% year-over-year to 158,006 through June.

Two of India’s Big Four – Mahindra & Mahindra and Tata – offer relatively few new products and continue to struggle.

Despite launching the relatively new XUV 500 and Xylo, Mahindra has relied mainly on the Bolero MPV introduced more than a decade ago. As a result its LV sales through first-half 2014 declined 11% to 204,404.

Tata, offering no new models recently, saw a 38.6% decline to 160,864 units.

India’s leading automaker, Maruti Suzuki, stepped up marketing in rural areas and managed a 2.7% uptick in LV sales through June, to 569,239.

Deliveries outside major cities increased 16% in fiscal 2013-2014 to 338,000, nearly 40% of total car deliveries so far this year. Maruti has set up 3,000 rural service centers and is doubling its 1,000 mobile service vans.

"In 2013-14, we sold cars in 93,700 villages,” says Mayank Pareek, chief operating officer. “But India has 650,000 villages, so the opportunity is still huge."

Other manufacturers without new vehicles or technology to offer also are faring badly. Toyota Kirloskar LV sales were off 19.8% in the first half, Renault India deliveries slumped 37.3% as the Duster’s initial popularity dimmed, General Motors India lost 29.5% and Volkswagen Group tumbled 39.9%.

Combined LV sales by low-volume luxury brands Audi, BMW and Mercedes declined slightly more than 1%.

The new government’s budget for the remaining nine months of the 2014-2015 fiscal year extends temporary concessions in excise duties until December. Otherwise it grants none of the auto industry’s demands, including an increase in depreciation rates to 25%. Replacing the sales tax with a goods and services tax, another industry goal, has not taken place.

The focus of the budget is on lowering personal taxes on income. Putting more money in taxpayers’ hands may have a modest effect on the purchasing power of vehicle buyers.

The government also has outlined huge investments in building rural roads and transportation infrastructure. But the auto industry must wait until the next fiscal year to see any direct tax benefits.