The Automobile industry was expected to witness drastic reduction in demand for vehicles after the demonetization of the higher denomination notes in the month of November 2016. Sales of Passenger vehicles, commercial vehicles, two wheelers and three wheelers suffered a setback in the month of November and December after it showed a year on year decline. The month of January 2017 has shown sharp recovery in demand for most of the segments of the Automobile industry. The Automobile industry seems to be back on the growth trajectory after a minor blip in the earlier months which is positive for the most of the other dependent ancillary industries. The rural market and the commercial vehicles category continue to face headwinds but are expected to recover at a relatively slower pace going ahead.
The industry produced a total 21,086,185 vehicles including passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadricycle in April-January 2017 as against 19,882,485 in April-January 2016, registering a growth of 6.05 % over the same period last year.
The sales of Passenger Vehicles grew by 9.17 % in April-January 2017 over the same period last year. Within the Passenger Vehicles, Passenger Cars, Utility Vehicles and Vans grew by 3.29 %, 32.08 % and 3.54 % respectively during April-January 2017 over the same period last year. Sales of passenger vehicles grew the fastest in four months in January with consumers appearing to have shrugged off the impact of demonetisation.
Maruti Suzuki India Limited, leader in passenger vehicles, sold a total of 144396 units in January 2017. This includes 133934 units in domestic market and 10462 units of exports. The Company had sold a total of 113606 units in January 2016. So despite demonetization the sales for Maruti Suzuki witnessed 11% growth on a year on year basis. This clearly indicates minimal impact of demonetization in the month of January 2017.
The overall Commercial Vehicles segment registered a growth of 3.03 % in April-January 2017 as compared to the same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) declined by (-) 1.53 % and Light Commercial Vehicles grew by 6.54 % during April-January 2017 over the same period last year.
Tata Motors with the largest market share in the Commercial Vehicle segment witnessed a 7% decline in the month of January 2017. Mahindra’s overall domestic auto sales, including commercial vehicles and three wheelers, during the month also contracted 9% to 37,042 units over the last year.
Three Wheelers and Two Wheelers
Three Wheelers sales declined by (-)1.09 % in April-January 2017 over the same period last year. Passenger Carrier sales declined by (-) 4.15 and Goods Carrier sales grew by 13.21 % in April-January 2017 over April- January 2016.
Two Wheelers sales registered a growth at 8.29 % during April-January 2017 over April-January 2016. Within the Two Wheelers segment, Scooters, Motorcycles and Mopeds grew by 12.55 %, 5.09 % and 26.79 % respectively in April-January 2017 over April- January 2016. Sales of two- and three-wheelers, continued to decline in the month of January 2017. Two- and three-wheeler sales, which happen mostly through cash transactions, continued to reel from the impact of the invalidation of older high value currency notes in early November.
The two- and three-wheeler manufacturer Bajaj Auto’s total domestic sales in January declined 16% to 1,35,188 units in January 2017 from 1,61,870 units sold during January 2016. Hero MotoCorp reported 13.53% dip in its total sales in the month of January 2017 at 4,87,088 units, as against 5,63,348 units in the year-ago period. Two Wheelers and Three Wheeler sales majorly happen on a cash basis and the impact has been felt in this category to the maximum extent.
In April-January 2017, overall automobile exports declined by 7.39 %. While Passenger Vehicles and Commercial Vehicles exports registered a growth of 17.24 % and 8.20 % respectively, exports of Three Wheelers and Two Wheelers declined by 34.02 % and 9.73 % respectively in April-January 2017 over April-January 2016.
Passenger Vehicles which includes Passenger Cars, Utility Vehicles and Vans along with the Light Commercial Vehicles have recovered in terms of sales growth as compared to the last year. Medium and Heavy Commercial Vehicles segment along with Two Wheelers and Three Wheelers have shown a decline in demand in the month of January 2017. The Union Budget announced tax cuts for the Rs.2.5 lakh to 5 lakh slab which would increase the disposable income in the hands of the middle class people. The implementation of the 7th Pay Commission and healthy monsoons in the year 2016 should give a boost to automobile demand in the near future and help for the lost ground due to demonetization.