Indian Auto Makers Look for Way Out of Doldrums

MUMBAI – Indian auto makers’ efforts to halt a sales slide that began last year are being thwarted by a stagnant economy, weak corporate earnings, rising costs of financing and the rupee’s double-digit loss of value in global markets.

Light-vehicle deliveries fell 8.4% in May compared with a year earlier, according to WardsAuto data. This included an 11.9% retreat in car sales.

Market reports indicate June results may be even more disappointing, despite the auto makers’ generous incentives, deep discounts and fresh launches of low-priced new-generation products.

Results varied widely among the volume auto makers. Market leader Maruti Suzuki sales dropped 13.0% year-over-year to 77,821 units, while No.4 Tata tumbled 25.9% to 35,307. Mahindra & Mahindra managed a 4.3% increase to 36,790, and Hyundai India delivered 32,102 LVs in the month, just eight fewer than in like-2012.

Positive results were reported by Honda Siel Cars, which grew sales 9.8% to 11,342 units with help from its new Amaze; General Motors India, boosted by the new Sail and Enjoy, saw a 40.2% gain to 8,496. The wildly popular new Duster helped Renault post a more than 12-fold increase, to 6,370.

Combined May deliveries of Ford India, Toyota Kirloskar and Nissan India LVs declined by one-third from year-ago.

Maruti Suzuki has closed its five plants for seven days this month: five for routine maintenance and two to limit its inventory of unsold cars. But, undaunted by the sales slump, the auto maker is launching several new models including a small car codenamed YL7 and a series of large cars including an SUV.

Chairman R C Bhargava says Maruti Suzuki also plans to enter light-commercial-vehicle production capacity by 250,000 units annually to 1.75 million and export the vehicles to the Middle East, Africa and Southeast Asia.

GM suspended production of its three models, including the Sail and Tavera, for a week. The auto maker cited “emissions issues,” but the shutdown came at an opportune time.

Mahindra, almost exclusively a maker of light trucks, entered the car market last year with its upmarket Verito sedan. It was joined last month by the Verito Vibe, a compact priced lower than the Toyota Liva, Maruti Swift and Hyundai i20.

“With this car, Mahindra enters the mass car market,” President Pawan Goenka says. “We would have many more compact vehicles and these would be across categories.”

The auto maker has added capacity of 35,000 units annually for the Verito and Verito Vibe, and has budgeted Rs100 billion ($1.7 billion) for diversification.

Toyota Kirloskar is studying whether to introduce a hybrid Etios sedan. It already is selling some Prius hybrids imported as completely built-up units, but a locally made Etios hybrid would be priced more competitively.

As more affordable compact sedans and SUVs arrive on the market, sales of hatchback cars have declined about 30% through May compared with year-ago. Nissan Micra deliveries have tumbled 62%, the Ford Figo 38% and Toyota Liva 28%.

Maruti Suzuki’s Alto hatchback was the segment’s sales leader for more than a year, offering gasoline or compressed-natural-gas engines. But the auto maker’s Swift Dzire compact sedan, which offers a diesel option and has more space, outsold the Alto for the first time in May.

A price war among high-end hatchback models costing Rs2 million to Rs3 million ($34,000 to $50,000) is being waged. Mercedes-Benz’s A-Class launches this month and B-Class models may follow soon. BMW’s 1-Series and the Audi A3 come to market in three months.

Competition among the luxury brands is intense. Audi and BMW sold 4,130 and 4,120 units, respectively, in the first five months and finished in a dead heat in May with 740 LV deliveries each. Mercedes trailed with 570 sales last month and 3,160 year-to-date, but its 5-month total was up 82.1% from like-2012.