Domestic Automobile Industry Sales Dropped On Weaker Demand

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Domestic Automobile Industry Sales Dropped On Weaker Demand
Himali Patel - 26 April 2019

According to a report published by India Ratings and Research on March 2019, the domestic automobile sales have dropped 14 per cent Year-On-Year (Y-O-Y) in March this year. The reason behind the same happens to be a fillip in weaker in demand, rising borrowing costs and augmented fuel prices. All these have affected the domestic automobile industry in the country to a great extent.

The report examined the on-going trends in thesub-segments of the auto sector, including passenger vehicles (PVs), commercial vehicles (CVs) and two-wheelers (2Ws), with a focus on sales volumes growth, market share movement, change in commodity prices and recent rating actions.

As per the findings, during March, CV sales volume growth remained stagnant primarily due to delayed purchases led by weak customer sentiments, rising borrowing costs, increased fuel prices and slow performance of the core sector. “Moreover, the new axle load norms have increased the maximum load carrying capacity of existing vehicles; consequently, despite an increase in demand for transportation, demand for new trucks declined,” said report.

One of the major reasons for a sharp drop in in CVs volume growth was contributed to lower credit availability due to a liquidity crunch in the non-banking finance company sector, which is the main source of funding for CVs. Sales volume of cars, dropped by 7 per cent Y-O-Y, while utility vehicles registered 2 per cent Y-O-Y growth in March 2019. That said, PV sales volume declined by 3 per cent Y-O-Y on an overall basis, during the month. This was again due to weaker demand coupled with higher insurance premium and an increase in fuel prices and interest costs. “The lending environment is under pressure, and liquidity remains tight. Buyers are also delaying purchases on account of the elections,” said the report. Motorcycle and scooter sales dropped 14 per cent and 25 per cent, in March as well.

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