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On the right track: Low base drives auto sales up by 12% in May, says Siam

Ajay Modi/New Delhi 12 Jun 18 | 03:15 AM

Most segments of automobiles, barring two-wheelers, have reported a strong double-digit growth in the wholesales for the month of May compared to the same month last year. The high growth rate comes on a low base of last year when manufacturers moderated dispatches to dealerships (counted as wholesales) in the run up to implementation of the goods and services tax (GST). 

Data from the Society of Indian Automobile Manufacturers (Siam) released on Monday shows that passenger vehicle sales growth stood at over 19 per cent YoY for May. All segment of passenger vehicles-cars, utility vehicles (UVs) and vans- reported a double-digit growth.  

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While the overall sales of the segment grew at 19.65 per cent to 301,238 units, dispatches of cars went up by over 19 per cent and UVs grew at more than 17 per cent. Vans clocked a growth rate of more than 29 per cent. The volume growth was led by companies such as Maruti Suzuki, Tata Motors and Honda. 

“The industry is well on track as far as sales growth is concerned. All segments have shown robust sales during the month," Siam Director General Vishnu Mathur said. He said various factors, including new product launches, helped create sales momentum in the passenger vehicle segment. 

Mathur referred to the low base of May 2017 as a factor behind the growth. “Sales were impacted last year in April-May as people anticipated an increase in vehicle prices due to the roll out of the GST. So, the growth we see in May this year, is on a somewhat lower base last year," Mathur said.  

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Two-wheelers, the biggest segment of the automobile industry by volume, posted a growth of around 9 per cent last month to 1.85 million units. However, scooter sales saw a dip of 1.4 per cent to 555,467 units compared to 563,326 units in May last year. The sale of scooters slipped for the first time after 15 months (sales had dipped by over 14.5 per cent in January 2017 after the demonetisation). 

Talking about scooter sales, Siam Deputy Director General Sugato Sen said the marginal dip in sales was due to inventory correction by a leading manufacturer. Scooter market leader Honda Motorcycle and Scooter India saw its domestic sales dip by 2.09 per cent to 327,167 units as against 3,34,168 units in the year-ago month. Sales of motorcycles remained strong and clocked a 15 per cent growth to 1.22 million units. Mopeds grew at a low single-digit of 4 per cent to 73,067 units. 

Commercial vehicle sales registered a 43 per cent growth YoY to 76,478 units. Within the segment sales of medium and heavy commercial vehicles (M&HCV) expanded 80 per cent to 30,128 units and light commercial vehicles (LCV) grew 26 per cent to 46,350 units. 

The commercial vehicle industry continued to witness strong growth in May aided by low base effect and strong demand across segments, including trucks, LCVs and buses. "The strong growth of 95 per cent in M&HCV truck segment comes back of a very low base of the previous year when the industry sales had declined sharply because of pre-buying in last quarter of 2017-18 and limited availability of BS-IV compliant stock," said Shamsher Dewan, sector head (corporate ratings) at ICRA.   

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The growth of all segments put together in domestic market stood at about 12 per cent to 2.28 million units. As a word of caution, Sridhar V, a partner at Grant Thornton India LLP said the rise in fuel prices and the interest rate going up could impact the demand in the next month or so.

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