Car makers in India may have more bad news to share on Monday



  • Passenger vehicle sales in India have been on a downtrend for seven months now and June 2019 may be no different.
  • A research report released two days before the monthly auto sales data projects another month of falling car sales.
  • Tata Motors may be the worst hit with a 30% contraction in car sales among the listed car makers in India in June .
Indian car makers have hit the worst patch in recent times. Passenger vehicle sales in India have been on a downtrend for seven months now and June 2019 may be no different.

A research report released two days before the monthly auto sales data projects another month of falling car sales, ahead of the actual monthly automobile sales data that will be released on Monday (July 1). "Our channel checks suggest that footfalls have dried up and only those OEMs (original equipment manufacturers) who have launched new models recently are getting some response from customers, " Nirmal Bang Institutional Equities said.

Tata Motors may be the worst hit with a 30% contraction in car sales among the listed car makers in India in June, according to the report followed by Maruti with a 11.6% slump while Mahindra and Mahindra seems better off than its peers with a 2.1% fall in passenger vehicle sales.


Consumer sentiment has suffered due to cost increase amid strict safety regulations, delay in monsoon, rural stress, slowing economy and liquidity constraints are weighing down car sales.

But stocks of Maruti and M&M seem bored of falling as investors have rued the declining fortunes for quite sometime now. Maruti has lost 27% of its market value in the last one year, M&M too has seen a similar loss in share price, while Tata Motors' stock has lost nearly 40% in the same period.


Luxury car makers have had it even tougher. 2018 was a bad year and the outlook is no better for the next couple of years. "2019 is going to be a challenging year. The next two years is not going to be easy for the overall luxury segment. While I do believe that sentiment will change in the second half of the year, it does not mean there is going to be a major increase, unless there are any drastic changes, any crucial changes that are related, again, to structures of taxes and duties," Rahil Ansari, Managing Director of Audi India, told Business Insider earlier.

Audi is planning to launch three new models this year, the R8, A8, and the Q8, in India. But, the German car maker is not expecting the cars to fly off the showroooms.

Watch excerpts of the interview here:



Truck sales are flopping

New norms for axle loads and a slowdown in the economy have reduced the demand for new commercial vehicles too. "Expect Ashok Leyland and Eicher Motors’ CV sales to also decline in double digits," Nirmal Bang said.



The new axle-load norms rolled out in August 2018 allowed Indian trucks to carry about 20% more payload than earlier. Transporters re-registered their trucks with the Regional Transport Office to carry more stuff. This means there is a need for fewer trucks leading to an oversupply in the industry. Freight rates have plunged while diesel prices have gone up causing much pain for the transporters as well as truck makers, according to a recent report from Crisil.



Both Ashok Leyland and Eicher Motors have lost nearly 32% in share price in the last one year while commercial vehicle sales turned wobbly. For Tata Motors, it's a double whammy because both its cars and trucks are struggling.


Other two-wheelers are skidding too but companies like Hero Motocorp, Bajaj Auto, and TVS Motor-- which largely focus on budget motorbikes with higher mileage-- are better off than the makers of cars and trucks but only slightly. The distress in rural economy has hit these manufacturers of budget motorbikes too.



SEE ALSO:
India's passenger car sales decline sharply in April

Indian airlines have more empty seats these days but their profits are soaring like never before-- and no one seems to care

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