ArrowArtboardCreated with Sketch.Title ChevronCrossEye IconIcon FacebookIcon LinkedinShapeCreated with Sketch.Icon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Business Trends

India auto sales stay sluggish on fuel costs, interest rates

Dealers tempt with festive-season discounts

Maruti Suzuki India, the country's largest carmaker, said vehicle sales barely edged up 0.2% in October.   © Kyodo

MUMBAI (NewsRise) -- Vehicle sales for Maruti Suzuki India, the country's largest carmaker, barely rose in October as high fuel prices and rising interest rates dented consumer sentiment in one of the fastest growing automobile markets in the world.

Total sales edged up 0.2% year on year to 146,766 units last month, the Suzuki Motor unit said in a statement on Thursday. Domestic sales of Maruti's cars, minivans, and sport-utility vehicles grew 1.5% to 138,100 units, aided by the demand for compact vehicles Swift, Ignis and Baleno. Exports, meanwhile, plunged 17% to 8,666 units in the month.

Demand for Maruti's utility vehicles Vitara Brezza and the Ertiga minivan declined more than 11%, while the new version of the mid-size Ciaz saw a 5.2% fall.

Brokerage Nomura expected Maruti to report a 5% increase in sales in October.

Maruti has been grappling with declining sales over the past three months thanks to the high base in the year-ago period, when India rolled out a nationwide Goods and Services Tax, which resulted in lower taxes. The lingering effect of floods in the southern Indian state of Kerala in August has compounded the industry's problems.

Still, auto makers have built up inventory ahead of the festival season that starts around October, when demand for vehicles peaks. Maruti has been offering discounts in the range of 20,000 rupees ($271.8) to 25,000 rupees this season as the number of potential buyers visiting car dealers has fallen drastically, say analysts.

"Sentiment has been affected due to higher fuel prices, interest rates and insurance costs," Nomura said in a report on Tuesday. Retail prices of gasoline and diesel in India hit record highs last month after crude oil prices jumped to a four-year high.

Over at Mahindra & Mahindra, India's second-largest SUV maker, commercial vehicles drove October sales 14% higher to 58,416 units. Sales of the company's SUVs, cars, and vans grew just 3%.

Passenger vehicle sales have been subdued across the industry in the past few months, Rajan Wadhera, the president of M&M's automotive unit, said in a statement. "One has to remain cautious on how the festive season ultimately turns out to be," Wadhera said

Rival Tata Motors, which also offers commercial vehicles, described October as "a challenging month" for the passenger vehicle industry, although strong demand for its compact cars and SUVs, including the new Nexon crossover, drove a 11% rise in sales in that category.

Tata Motors said it introduced four new product upgrades to take advantage of the festive season. It expects the "fervor" to continue with the introduction of the SUV Harrier in early 2019, it said.

Overall, the company's sales improved 18%.

Nomura expects nationwide sales to pick up pace heading into the major Hindu festival of Diwali, which falls next week, as fuel prices cool off. About 60%-65% of sales occur in the second half of the festive season.

"In case that does not happen, there will be further risk to volume growth in coming months," the brokerage warned. It also cut its outlook for sales growth this fiscal year ending March to 5% from 13% set at the start of the period.

Shares of Maruti gained 1.5% while Mahindra lost 1.1% in Mumbai on Thursday. Tata Motors added 0.1%. The benchmark Sensex index ended little changed.

--Dhanya Ann Thoppil

You have {{numberReadArticles}} FREE ARTICLE{{numberReadArticles-plural}} left this month

Subscribe to get unlimited access to all articles.

Get unlimited access
NAR site on phone, device, tablet

{{sentenceStarter}} {{numberReadArticles}} free article{{numberReadArticles-plural}} this month

Stay ahead with our exclusives on Asia; the most dynamic market in the world.

Benefit from in-depth journalism from trusted experts within Asia itself.

Try 3 months for $9

Offer ends September 30th

Your trial period has expired

You need a subscription to...

See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

See all offers
NAR on print phone, device, and tablet media