Four wheeler sales fail to revive despite Cenvat cut

Four-wheeler sales fail to revive despite Cenvat cut

A Reliance Money Analysis

December 2008 turned out to be yet another disappointing month for the passenger vehicle industry. The small car segment, nonetheless, witnessed some buying on the back of Cenvat cut announcements.
Maruti Suzuki’s A2 segment reported a 5.3 percent growth on a month-on-month basis, while sales plummeted 6.9 percent YOY. Hyundai Motors’ overall sales reported a growth of 48.9 percent YOY mainly on the back of strong exports and increased volumes in the small car segment.

Apart from the small car segment, sales of CVs have continued to fall as lack of financing and higher interest rates continue to remain a major block for this industry. LCV segment sales of Tata Motors and M&M have reported a fall of 19.6 percent YOY and 62.8 percent YOY respectively. The recent move by RBI to infuse liquidity by way of CRR, Repo and Reverse Repo cuts is likely to benefit loans offered to auto consumers of cars and trucks, etc. But we believe the process of reduction in interest rates on auto loans to be slow, which will not offer significant boost to sales volumes in passenger car and CV segment sales.

Tata Motors: Overall sales decline 47 percent

TM’s overall sales in December 2008 reported a fall of 47 percent YOY to 25,219 vehicles. Fall in sales volume was on account of fall across all segments. TM’s CV segment sales recorded a fall of 51 percent YOY, which was due to steep fall of 69 percent YOY in M&HCV segment. Its LCV segment also reported a negative growth and reported a fall of 28.7 percent YOY. While, the car segment sales slumped by 31.3 percent YOY, which was imparted by 59 percent fall in UV segment sales. However, other car sales also reported falls which led to a 31.3 percent YOY fall in car segment sales.

Exports of the company also reported a fall of 72 percent YOY to 1,325 vehicles. While on a cumulative basis the exports of the company also reported de-growth of 27.8 percent YOY. Tata Motors from the past few months has been witnessing weak demand in its passenger segment, which is due to the excise hike, aging Indica and lack of financing. Indica sales for the month of December 2008 have reported a fall of 29 percent YOY to 6749 vehicles.

It is noteworthy that the Indigo, which has been registering strong growth, have continued to grow and have registered a growth of 21 percent YOY to 1673 vehicles. Impact of the excise duty hike and rise in fuel costs has been challenging the UV segment since July 2008 and during the month of December 2008 sales of UVs fell by 59 percent YOY to 1416 vehicles as against 3440 vehicles in the same period last year. Due to the fall in UV segment sales the overall cars segment reported a fall of 31 percent YOY.

M&M sales down 29.5 percent

M&M’s overall sales volumes for the month of December 2008 registered a fall of 29.5 percent YOY to 15,695 vehicles as against 22,278 vehicles in the same period last year. Prime reason behind the fall in sales volume was fall across all segments. But falls to
the extent of 22 percent in UV segment and 81.9 percent fall in Logan sales have dragged the overall volumes southwards. Apart from these two segments, LCV and three-wheeler sales also reported fall of 66 percent and 5.8 percent respectively. Exports of the company during the month of December 2008 reported a fall of 60.7 percent YOY to only 412 vehicles as against