Complete Indian Auto Sales Analysis: H1 heralds a strong FY17

Source: Auto.economictimes.com, Oct. 10, 2016

New Delhi: Improving rural demand and new launches have yielded strong growth in automobile wholesale in India in the first half (H1) of the financial year 2016-17.54782383

According to the data released by the Society of India Automobiles Manufacturers (SIAM), the domestic auto sales surged by 16.33 percent during the period April-September 2016 at 1,16,52,160 units compared to the same period a year ago. The industry experts see it as an antecedent to a strong growth in the full financial year.

“The growth has come in from new models and this growth is also in anticipation of good buying in the upcoming festive season. Festive buying would be a key to defining the overall growth in the full financial year,” Rakesh Srivastava, senior vice president (marketing & sales), Hyundai Motor India, told ETAuto.

Sugato Sen, deputy director general, SIAM, told ETAuto, “The 7th Pay Commission has brought excitement among the buyers. We expected the PV (passenger vehicle) sales to grow by 10-13 percent and we expect the segment will be able to achieve it.”

downloadSIAM expects the H2 to have a 10% growth in the PV sales as it expects a slight correction in the Q3 and a moderate growth in the Q4 on account of GST. There may even be a shortfall in demand in the Q4 owing to postponement of buying till the Q1 of the next fiscal year in anticipation of lower price with the implementation of GST.

The growth has been led by two-wheeler and passenger vehicle segment, which grew by 17.47 percent and 12.34 percent respectively in H1. India sold 14,94,039 units of passenger vehicles in H1 of FY17 compared to 13,29,874 units sold in the same period a year ago.

“The passenger vehicle sales growth came on the back of improving consumer sentiment, new model launches, lower financing costs and anticipation of a strong festive season prompting automakers to build stocks across the dealer network,” Rakesh Batra, national leader (automotive), EY, told ETAuto.

The new launches have pushed the utility vehicle sales up in the H1, which experienced a growth of 40.2 percent. While the car sales grew by 5 percent during the same period.

“The PV market is expected to witness 9%-11% growth in FY17, driven by a strong festive season, coupled with new model launches, implementation of revised salary structures under the 7th Pay Commission, and improvement in the rural economy,” said Batra.

The PV sales growth in the Q2 also contributed to the surge in the H1 with a sales spike of 18 percent in the Q2 of FY17 by selling 7,97,000 units compared to 6,76,000 units sold during the same period a year ago.

PV exports also rose by 15.3 percent in the first half of the financial year 2017 with 3,67,110 units exported compared to 3,18,188 units during the same period a year ago. Utility vehicle export grew fastest by 58 percent at 79,960 units in H1 of FY17 compared to 50,329 in the same period a year ago.

Two-wheeler

The two-wheeler domestic sales grew fastest among all the segments in the first half of the financial year 2017. The main driver for the spike was rural and semi urban market demand, which improved with good monsoon. The overall agriculture sector grew by 4 percent in FY17 till now as against 1.1 percent in the FY16 in the same time period.

In the first half of the FY17, 95,36,952 units of two-wheelers were sold compared to 81,18,608 units sold in the same period a year ago. The scooter segment led the growth in the two-wheeler segment with recording a growth of 26.94 percent in the H1 of FY17 at 30,48,195 units sold compared to 24,01,303 units sold a year ago in the same period.

The major part of the growth came in the second quarter of the financial year led by two-wheeler and passenger vehicle segments. Establishing the revival in rural market, two wheeler sales jumped by 21 percent in Q2 of FY 17 by selling 49,94,000 units compared to 41,43,000 units sold in the same period a year ago.

“Two-wheeler sales witnessed a growth owing to a low base and a strong monsoon-backed improvement in buyer sentiment — especially in rural and semi-urban areas. The segment is expected to close the FY17 with a 10%-12% growth, driven by strong festive season with a revival in the rural economy and improved penetration of organized financing in tier 2 and tier 3 cities,” said Batra.

He added that scooter sales are likely to be driven primarily by higher displacement products, supported by improvement in capacities, strengthening urban consumption, increasing acceptability in rural areas and salary revision owing to the 7th Pay Commission.

Two-wheeler exports continue to witness pressure due to falling demand in its key markets like Africa, Middle East, Sri Lanka etc. In the first half of the current fiscal year, two-wheeler exports tanked by 12.45 percent at 11,83,087 units, compared to 13,51,364 units in the same period a year ago.

“The two wheeler export markets are located in Asian, African and South American continents. In the South American continent, which includes countries like Brazil, Argentina and Mexico, the demand is muted; similarly in the African continent, half the countries, which predominantly include big markets like Nigeria, are not doing well, a key reason being low GDP mainly on account of low commodity and oil prices and most of these economies depend upon the commodity exports; in addition, there is low demand in all key markets across the globe due to slow growth, as a result, Indian two-wheeler manufacturers are facing difficulty in the export market,” Abdul Majeed, partner (automotive), Pricewaterhouse, told ETAuto.

Three-wheeler

Three-wheeler domestic sales went up by 13.30 percent in the H1 of FY17 by selling 2,87,738 units compared to 2,53,768 units sold in the same period a year ago. The goods carrier saw a surge of 18.1 percent in demand in the H1 of the current financial year while the passenger carrier sales went up by 12.4 percent in the same period a year ago.

The production of three-wheelers dipped by 10.50 percent in the HI of FY17 owning to a drop in the exports. India shipped only 1,49,917 units of three-wheeler in the first half of the FY17 compared to 2,47,061 units exported in the same period a year ago, recording a dip of 39.3 percent.

“The main reason behind the fall in three-wheeler exports is that the major markets like Nigeria, Sri Lanka, Bangladesh and Latin America, which contribute about 50% of the total three-wheelers exported from India, have been down due to various economic reasons,” top executive of a three wheeler manufacturer told ETAuto.

Commercial Vehicle

The medium and heavy commercial vehicle (M&HCV) segment, which largely depends on the core industries such as mining and road & infrastructure, has reported a decline of 1.19 percent in the first half of the current financial year at 1,37,664 units sold, compared to 1,39,325 units sold in the same period a year ago.

After a year-long revival in the segment on the back of replacement demand, the sales started waning out in the last few months. In the second quarter of FY17, the M&HCV sales dropped by 14 percent at 67,000 units compared to 77,000 units sold in the same period a year ago. In the Q2 of FY16, the sales for the segment had surged by 43 percent.

“The M&HCV sales, which was going strong on replacement demand, has started to wane out as the core sectors like mining, infrastructure were not growing. However, we expect the activity to start, which will propel a growth in the segment. Surely, the second half will be much better than the first half,” Vishnu Mathur, director general, SIAM, told ETAuto.

In the M&HCV segment, passenger carrier suffered the most in the first half recording a drop of 8.4 percent in the domestic sales. However, the JNNURM II (Jawaharlal Nehru National Urban Renewal Mission, Phase II) order for 1,000 buses by the end of FY17 will improve the situation.

In the M&HCV segment, buyers also remained confused whether they should wait for the GST implementation, which is expected to bring down the cost, while the cost is also expected to go up with BS-IV implementation.

The LCV segment witnessed a strong sales growth of 11.6 percent in April-September 2016 at 1,95,767 units compared to 1,75,270 units sold in the same period a year ago. The passenger segment grew by 7.6 percent even as the goods carrier segment grew by 12.40 percent in the same comparative period.

The LCV sales is further expected to pick up owing to improving rural consumption demand and expected ease of financing. While a slight advancement of sales is expected in Q4 of FY17.

The overall commercial vehicle segment registered a growth of 5.99 percent in April-September 2016 as compared to the same period last year. M&HCVs registered a negative growth of 1.19 percent and light commercial vehicles grew by 11.69 percent during April-September 2016, over the same period last year.

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