Light Trucks Stall as India Sales Remain in Reverse

Light-truck sales in India made an unwelcome about-face in July, dropping 11.2% from like-2012 to 92,446 units and reducing year-to-date growth to 5.3%, according to WardsAuto data.

Car deliveries dropped 7.1% to 132,533 units, but the rate of decline was only half the segment’s 14.3% slump over the year’s first seven months. Light-vehicle sales totaled 224,979 last month, down 8.8% compared with year-ago.

Exports offset the market’s overall contraction somewhat. The Society of Indian Automobile Manufacturers reports overseas shipments increased 19.6% to 57,335 units.

Diesel-vehicle makers suffered the most in July, as government oil companies reduced the gap between diesel and gasoline prices from Rs20 per liter ($1.25 per gallon) in January to Rs14 per liter ($ 0.87 per gallon) the previous month. Tata, a major producer of diesel vehicles, saw sales tumble 33% to 37,433.

In addition, deliveries of large SUVs trailed car volumes as the impact of the February increase in duty from 27% to 30% on high-ground-clearance SUVs was increasingly felt. Sales by major SUV maker Mahindra & Mahindra dropped in July for the first time in two years, tumbling 20.5% to 29,718 units.

Cars and SUVs longer than 157.5 ins. (400 cm) increasingly are making way for compact and entry-level models.

Year-on-year gains were posted in July by Honda India (154.2%), Ford (26.1%) and Maruti Suzuki (10.9%), on the strength of new small SUVs and compacts.

Of the three, only Honda saw deliveries of both cars – including the new Amaze compact sedan – and light trucks increase. Ford car sales plunged 49.4% but the auto maker achieved a positive result in July thanks to the EcoSport compact SUV. Conversely, demand for Maruti Suzuki’s next-generation Swift, Dzire, Ertiga and Alto small cars offset light trucks’ 14.6% drop.

Renault India is a low-volume player, but its Duster compact SUV powered a 77% increase in light-truck deliveries in July. Fiat India car sales gained 20.5%.

Declines in both car and light-truck sales were posted in July by Nissan (-64.8%), Tata (-33%), Skoda India (-23.7%), Mahindra & Mahindra (-20.5%), General Motors India (-10.4%), and Hyundai India (-5.9%). The latter is working on an entry-level compact sedan.

Year-to-date results by luxury brands Audi, Mercedes-Benz, BMW and Tata’s Jaguar Land Rover were ahead of like-2012. Of that group, only JLR saw month-over-month sales fall in July.

Mercedes, sandwiched between Audi and BMW in the high-end race, is looking to overtake Audi with the recent launches of its A- and B-Class models and upcoming SLK and CLS “dream cars,” as well as its high-performance AMG range of models.

As the downturn continues, SIAM is pressing the government for a stimulus package of tax concessions. But the government itself is facing both budgetary and balance-of-payments deficits and is in no mood to give out tax breaks.

Major auto makers therefore are seeking new markets in remote and underdeveloped areas. Car ownership in India is 18 vehicles per 1,000 people. But in the eight smaller states in the northeastern border regions, vehicle ownership is as low as five per 1,000.

“Northeast India promises to be an excellent opportunity,” says Mayank Pareek, Maruti Suzuki’s chief operating officer.

Mahindra & Mahindra President Pawan Goenka puts a note of hope into the gloomy scenario, telling the Wharton School of Business’s online journal earlier this month: “We find that demand for mobility solutions still exists and products satisfying varied customer segments are also available.

“The slowdown is partly due to the volatile economic environment…But I have confidence in the India growth story.”