Highlights:
- Very weak numbers from auto majors in all segments
- Slowdown in economy, new axle load norms, tight liquidity and non-availability of finance weigh on CVs
- Deficit in rainfall dampened tractors sales
- Two-wheeler and passenger vehicle segments continue to hit speedbump
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Auto industry continues to face severe challenges arising out of weak macro environment and regulatory framework. The severity of slowdown is clearly visible in July monthly numbers of auto majors.
In fact, the management of auto majors continues to be very cautious and expects challenges to persist in near to medium term. Possibility of normal monsoon, good festive season and pre-buying ahead of BS VI implementation are the hopes for demand traction in coming months.
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Commercial vehicle (CV) segment numbers witnessed a sharp decline in the said month. Demand scenario continues to be lacklustre for the companies in the segment. Tractor segment continued to remain sluggish on the back of higher base last year, delayed rainfall and subdued farm sentiment.
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Three-wheeler (3W) sales were mixed on the back of very high base of the previous year. Two-wheeler volumes continue to be very disappointing due to higher cost of ownership, high base and adverse macro factors.
Commercial Vehicle – Difficult times
The axle load norm, which increased carrying capacity in M&HCV segment, has impacted the segment. This coupled with factors such as economic slowdown, liquidity crunch and non-availability of finance have led to significant decline in the segment. Additionally, customers have been postponing purchases, given the poor freight availability and the falling freight rates that are impacting their finances.
Company-wise, Tata Motors registered a 34 percent year-on-year (YoY) decline in CV volume, hit by 35.5 percent drop in M&HCV segment and 21 percent in LCV segment. Eicher Volvo also witnessed a decline of 32 percent. M&M and Ashok Leyland also reported a slide of 17 percent and 29 percent, respectively. The weakness is now extending to the LCV segment as well, which was not the trend earlier.
Cars Segment – No respite
Stress continues to increase in car segment with no respite in sight. Weak sentiment in the space is due to increase in total cost of ownership led by mandatory long-term insurance. Further, implementation of safety norms has led to increase in prices and impacted sales amid weak consumer mood. Hence, companies in the space posted a decline in PV volume for July.
The leader, Maruti, posted a sharp decline of 37 percent in its volume for the month. Tata Motors’ passenger car segment witnessed a drop of 31 percent (YoY).
Two-wheeler (2W) segment: Significant decline
Hero, the leader in the space, witnessed a sharp sales decline of 21.2 percent. Eicher, leader in premium bike segment, also witnessed a decline of 21.5 percent in its monthly sales numbers. Bajaj Auto and TVS witnessed a contraction of 15.1 percent and 14 percent, respectively.
Three-wheeler (3W): Muted growth
The overall 3W market posted mixed numbers in July 2019. TVS posted a growth of 3.5 percent and M&M posted a decline of 15.6 percent. Bajaj Auto, the leader in the space, posted a decline of 4.4 percent.
Tractors: Muted farm sentiment impacted demand
Delayed rainfall, monsoon deficit and uneven rainfall distribution have played spoilsport for the tractor segment. Escorts posted a significant fall of 17.8 percent while M&M's came down by 11.8 percent. The M&M management expects that government initiatives to increase rural income through farm & non-farm sources and an overall improvement in liquidity will spur tractor demand during the second half of the year.
Exports: Mixed sentimentExport numbers are mixed for July 2019. Maruti, TVS, and Tata Motors witnessed decline whereas Eicher Motors, M&M, Bajaj Auto and Escorts posted growth in the volumes.
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