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Customer LoginsSame-Day Analysis: Growth in Indian new vehicle market slows during January as passenger car sales decline
The overall new vehicle market in India experienced slow growth during January as sales of passenger cars fell slightly for the first time in 14 months.
IHS Automotive Perspective
- Significance: During January, the total new vehicle market in India registered a modest increase of 3.7% year on year (y/y), due to slow sales in the passenger vehicle segment, although commercial vehicle sales continued to expand by double-digit figures.
- Implications: Sales of passenger cars declined for the first time in 14 months due to pre-emptive buying in December 2015 on the back of several year-end deals and discounts offered by automakers and dealers, which affected the overall performance of the passenger vehicle segment.
- Outlook: Improving consumer sentiment, driven by lower inflation and lower crude-oil prices, are expected to support further growth in 2016, as IHS Automotive expects a 9% y/y gain in total new vehicle sales in the country this year. Potential factors that could negatively influence vehicle demand this year include price-hike announcements by original equipment manufacturers, Indian city government of Delhi's ban on sales of diesel cars above 2,000 cubic centimetres, and possible delay in monsoons affecting demand in rural markets.
Growth in the Indian new vehicle market remained slow with total volumes of 293,699 units during January 2016, representing a modest gain of 3.7% year on year (y/y). Sales of passenger vehicles came in at 232,016 units (up just 0.6% y/y), split between passenger car sales of 168,303 units (down 0.7% y/y), although the utility-vehicle (UV) segment helped with 3.4% y/y growth in sales to 50,122 units and vans with 13,591 units, also up 7.5% y/y. Meanwhile, commercial vehicle (CV) sales continued their growth trajectory in January as well, with a gain of 17.5% y/y to 61,683 units. This is split between a 33.6% y/y surge in sales of medium/heavy commercial vehicles (MHCVs) to 28,533 units, and a 6.5% y/y rise in light-commercial-vehicle (LCV) sales to 33,150 units.
Overall automaker Maruti Suzuki continued to maintain its unchallenged position in the Indian new passenger car market during January with sales of 106,383 units, albeit up just 0.8% y/y. Hyundai came in second with sales of 38,016 units (up 9.3% y/y); this was followed by Mahindra & Mahindra (M&M) with 22,088 units (up 12.9% y/y); Honda with 17,135 units (down 6.5% y/y); Tata with 12,987 units (down 12% y/y); Toyota with 8,511 units (down 32.7% y/y); Renault with 8,031 units (up 150.7% y/y); Ford with 7,045 units (up 6% y/y); Volkswagen (VW) with 4,018 units (up 7.6% y/y); General Motors (GM) with 2,788 units (down 36.8% y/y); and Nissan with 2,668 units (down 37.5% y/y). In the CV segment, Tata sold 28,411 units in January with volumes up 19% y/y, followed by M&M with 14,385 units (up 11.1% y/y), and Ashok Leyland with 12,564 units (up 32.5% y/y).
Production and exports also move up
During January, total vehicle production in India came in at 352,940 units, with a modest growth rate of 1.4% y/y. This is split between passenger vehicle output of 281,831 units (down 1.9% y/y), although CV production remained comfortable with a growth of 16.6% y/y to 71,109 units. Total vehicle exports during the month appear disappointing, as it registered a 1.4% y/y decline to nearly 51,507 units. Of this total, passenger vehicle shipments came in at 42,084 units, representing a decline of 6.7% y/y solely on the back of an 18.9% y/y drop in passenger car exports. Nevertheless, CV exports rose with a growth rate of 32.7% y/y to 9,423 units, although this failed to offset the sluggishness overall.
Outlook and implications
The Indian new vehicle market posted impressive gains during the full-year period in 2015, mainly aided by a strong fourth quarter, due to heavy year-end discounts, moderation in interest rates, and the rush in dealer showrooms in anticipation of price-hike announcements by original equipment manufacturers (OEMs). These were further supported by improved consumer sentiment, driven by lower inflation and lower crude-oil prices, as well as new model launches such as the Suzuki Baleno and Hyundai Creta, among others. The repo-rate cuts by the Reserve Bank of India in January, March, June, and September helped boost investor and consumer confidence in 2015. These had a negative effect on January sales, due to pre-emptive buying in the previous months in 2015, although February sales are expected to be slightly better as the country has hosted its biennial auto expo during the month.
Going forward, most of the factors that aided the market in 2015 are expected to remain in place this year. Included in this group are soft crude oil prices, benign inflation levels, and falling interest rates. Potential factors that could negatively affect vehicle demand this year include the regulatory uncertainties surrounding diesel vehicle ban in the Indian capital city of New Delhi. New Delhi is a big market in India and contributes around 12% of the total Indian car market. The current ban on registration of new diesel vehicles with engines over 2 litres by the Indian authorities is applicable until 31 March 2016, and the government is considering re-implementing it sometime in April as well, which could be a big setback for diesel car OEMs in the country. Among automakers, Maruti Suzuki is expected to post a slight decline in sales of 0.7% y/y, due to an expected slowdown in sales of its key models, which registered better-than-expected success in the market in 2015, including the Swift Dzire and the new Celerio. Nevertheless, the recently launched new Baleno, along with new models that were recently shown at the country's auto expo, are expected to help avoid drastic decline in volumes for the automaker this year. Hyundai is also expected to experience a slowdown this year, due to better-than-expected show of its Grand i10, Elite i20, EON, and the Xcent models. The Creta compact sport utility-vehicle (SUV) is the only nameplate expected to see positive sales numbers this year. Among the top-5 best-selling brands, M&M, Tata, and Honda are likely to be the bumper performers in the Indian new vehicle market during 2016. M&M's sales are expected to be supported by new Bolero and all-new compact SUV, currently code-named KUV100. Tata has a series of new models in its pipeline for launch this year, while Honda's Indian sales will be supported by the new BR-V compact SUV model. Renault's sales are receiving a boost from the new Kwid, while Ford's sales are driven by the Figo Aspire and the Figo nameplates.
IHS Automotive has a growth rate of 8.9% y/y for total industry sales in India during the full-year period in 2016 to 3.77 million units. Of this total, light vehicle sales (comprising passenger cars and LCVs) are predicted to come in at 3.44 million units (up 10.3% y/y), although sales of MHCVs are expected at 330,271 units, down 3.8% y/y.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.