The festival season is off to a sombre start for India's car and two-wheeler makers

  • Car sales typically accelerate around the closing months of the year which coincides with a bunch of festivities in India.
  • However, the demand seems weak and the sales may be lower than last year, according to a global brokerage CLSA.
  • The estimates are based on a survey of dealers across three big Indian states-- Maharashtra, Gujarat, and Kerala.
The last few months of the year are dotted with festivities across India. Amidst celebrations, people end up spending on discretionary products like cars. However, the festive season of 2019 may not be so upbeat for Indian car makers as well as two-wheeler makers, despite deep discounts.

A survey of dealers by global brokerage CLSA found that dealers continue to see weak demand and it fears lower sales compared to last year. "The latter part of the festive season, mainly in October this year, is typically more important for auto sales, but a weak start is still a concern," the report said.

The surveys were conducted in three states-- Maharashtra, Gujarat, and Kerala-- which make up for a quarter of all country's car sales and 18% of all the two-wheeler sales in India. People are also waiting to see if the government will cut the Goods and Services Tax (GST) on automobiles and therefore delaying possible purchases. Marquee stocks like Maruti, M&M, and Tata Motors have lost anywhere between a quarter and half of their share value in the period.

Car sales in India have been on a downtrend for a year now due to many factors including a broader economic slowdown, tighter emission norms and higher taxes.


Two-wheelers have been better off, until now. "Our survey indicates that channel inventories remain high and the extent is relatively more in two-wheeler. Absence of a meaningful pick-up in demand in the remaining festive season is thus likely to necessitate significant inventory correction, especially for two-wheelers," CLSA said.

SEE ALSO:
Maruti’s July car sales fall by a shocking 33.5%, despite heavy discounts


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