Auto Sales Tumble Again But Stocks Jump On Optimism
Traffic moving along a highway passes a Delhi Metro construction site during evening rush hour in Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Auto Sales Tumble Again But Stocks Jump On Optimism

Shares of the automakers rose led by two-wheeler companies on hopes that the worst of the slowdown may be behind the industry.

Sales fell over the previous year for most of the makers of cars, utility vehicles, scooters and motorcycles in May, according to numbers filed with exchanges. Volumes of Maruti Suzuki India Ltd., India’s largest carmaker, tumbled the most in nearly seven years. Hero MotoCorp Ltd., the nation’s biggest two-wheeler company, also reported lower numbers. But its volumes were higher than expected, and better than the previous month.

There is still some pain left in terms of sales for the auto industry, Ashwin Patil, analyst at LKP Securities, told BloombergQuint. But in the near term, there are a few positives like a near-normal monsoon forecast, a possible cut in GST rate for two-wheelers to 18 percent and the fact that sales for Hero MotoCorp improved over the previous month, he said.

Hero MotoCorp’s stock jumped as much 5.5 percent, the most in four months. That compared with a 1.4 percent rise in the Nifty Auto Index as of 1:45 p.m. Bajaj Auto Ltd., TVS Motor, Ashok Leyland Ltd. and Maruti Suzuki were also trading higher.

Auto sales have slowed since the festival season last year as Indians cut spending. Other indicators like consumer goods volumes also suggest a slowdown in demand, pulling GDP growth to its lowest in 20 quarters in the three months ended March.

For automakers, there was no respite in May. Category leaders Maruti Suzuki, Hero MotoCorp and Mahindra Tractors reported year-on-year contraction in volumes for the fourth straight month. And sales fell for most of their peers.

Here’s how the automakers fared in May:

To read more about May auto sales, click here.

Passenger Vehicles

Maruti Suzuki’s sales volumes tumbled 22 percent over the previous year, the biggest drop since August 2012. Its mini segment, including the Alto and the WagonR, reported a 25 percent decline in volumes.

But RC Bhargava, chairman at Maruti Suzuki, sounded optimistic. “Sales were expected to slow due to the election season,” he said. “But from August this year, we expect growth in our sales volumes.”

Mahindra & Mahindra Ltd. also reported a 3 percent decline in volumes of its cars and utility vehicles. “We had shut production at one of our plants in Maharashtra for three to four days to adjust inventories,” Rajen Wadhera, president at M&M Auto, told BloombergQuint over the phone. “This would mean that the decline in sales in May was also partially due to production cuts and resulting lower wholesales to dealerships for the month.”

Tata Motors Ltd., in a statement, said poor market sentiment impacted the sales of its cars and utility vehicles. It’s passenger vehicle sales tumbled 38 percent.

Two-Wheelers

Volumes Hero MotoCorp fell 7.7 percent year-on-year in May. The sales of maker of Splendor motorcycle, however, rose more than expected to above six lakh units for the first time since February as the company launched three premium motorcycles and two scooters in May.

Eicher Motors Ltd., the maker of Royal Enfield motorcycles, also saw its sales tumble for the seventh straight month, and the company attributed to slowdown in the industry. Volumes fell 17 percent in May.

TVS Motor’s sales fell 1 percent. Bajaj Auto Ltd., however, saw its volumes rise 3 percent year-on-year to 4.19 lakh units.

Commercial Vehicles

Eicher Motors’ truck sales tumbled 20 percent in May. The volumes of commercial vehicles have fallen amid financing problems as non-bank lenders have been facing a credit crunch since the IL&FS defaults last September.

Tata Motors, India’s largest truckmaker, reported a 20 percent decline in volumes. The company cited depressed freight rates and underutilisation of trucks for the fall.

Tractors

Mahindra & Mahindra’s tractor divisions sales tumbled 16 percent in May. Rajesh Jejurikar, president, farm equipment sector at M&M, is optimistic. “Post the slowdown in past few months, we hope that a strong push by the government on agri initiatives, coupled with a normal monsoon forecast by IMD, would boost the tractor demand.”

Escorts Ltd.’s tractors volumes declined 18 percent ahead of the monsoon season.

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