Auto Sales Volume Decline for Second Consecutive Month in January

Trends in the sub-segments of the auto sector, including passenger vehicles (PVs), commercial vehicles (CVs) and two-wheelers (2Ws), with a focus on sales volumes growth, market share movement, change in commodity prices and recent rating actions, were revealed in the just-released India Ratings and Research (Ind-Ra) January 2019 edition of its credit news digest on India’s auto sector.

The report shows that in January 2019, CV sales volume grew at a marginal 2% yoy on account of a 1% yoy and a 3% yoy growth in MHCVs and LCVs sales volume, respectively. Delayed purchases owing to weak customer sentiments, rising borrowing costs and increased fuel prices translated into modest sales growth. Sales were further hit by new axle load norms that have increased the maximum load carrying capacity of existing vehicles, and the same is accompanied by increased transportation demand resulting in lower demand for new trucks. In addition, sales were affected by lower credit availability owing to a liquidity crunch in the non-banking finance company sector, which is the main source of funding for CVs. However, tipper segments and LCVs continued to witness a slightly better growth, backed by rise in construction spending, steady demand from the rural economy and consumption-driven and e-commerce sectors.

After reporting muted growth in December 2018, PV sales volume declined on a year-on-year basis in January 2019 due to weak buyer sentiments, higher insurance premiums and an increase in fuel prices as well as interest costs. Furthermore, the lending environment is under pressure, and liquidity remains tight. In January 2019, sales volume of both cars and utility vehicles decreased 3% yoy and 4% yoy, respectively.

In January 2019, 2W sales volume declined for the second consecutive month on account of declining sales volume across all sub-segments. Sales were constrained by higher insurance premiums and restriction in West Bengal (a significant market for 2Ws) that permits the sale of 2Ws to only driving licence holders.

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