August sales figures suggest worst is over for automobile industry

Key highlights:

• Sales numbers in August are clearly positive
• Signal that the automobile industry is almost out of the difficult times
• Passenger vehicles have registered a 7.5% growth during the April to August in FY18

Automobile companies have seen a good growth in April to August 2017 period despite several road bumps during the period. The sales numbers in August are clearly positive and signal that the automobile industry is almost out of the difficult times, said a CARE Ratings report.

While passenger vehicles have registered a 7.5% growth during the April to August in FY18, it is a little lower to 11.3% growth in the same period in FY17. Commercial vehicles (CV) sales posted a 33.1% decline in sales in the same period in FY18, from an 8.7% growth in FY17.

Two-wheeler and three-wheelers however saw a positive 14.2% growth in April-August FY18 from a 16.7% decline in the same period in FY17.

It said that automobile players started off with strong sales while the growth was restricted by the goods and service tax (GST) implementation and ambiguity with the cess rate to be charged to the different categories of passenger vehicles.

“Commercial vehicle (CV) sales were affected sharply during the period on account of slower manufacturing and economic activities on account of uncertainties surrounding the GST implementation and rates for various products,” said the report.

However, the month of August showed that there was clearly a recovery on track. During August 2017, CV and two and three wheeler sales saw a robust double digit growth.

Passenger vehicle sales recorded positive growth, but this growth was restricted due to the uncertainty revolving around the GST cess rate, said the report.

The CV segment growth during the month has been fueled by infrastructure and construction activity growth during the month.

It added that the rural demand for CV and two-wheelers has also picked up on the back of good monsoon season. Interest rates have been declining making available easy access to financing. These reasons it said have spiked the demand in the market.

“With festive season round the corner, the industry is set to get a further leg up when usually the manufacturers look at good over 20% growth in sales during the period,” said the report.

However, exports continue to struggle as some of the key players have seen a drop in exports during this period.

“Exports though continue to post negative sales with some key exporters facing a drop in volumes on account of rupee appreciation as compared to many other currencies. However, two and three-wheeler exports recorded a strong double-digit growth during August 2017,” said the report.

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