Domestic sales for two big carmakers fell in August as rising fuel costs and interest rates took their toll and analysts say the industry could suffer more pain as a weaker rupee hits profit margins during key sales months ahead.
Industry-wide car sales in India have declined every month this year and carmakers have taken steps to reduce production and labour costs. Tata Motors said local vehicle sales fell 33% in August while passenger car volumes at Mahindra and Mahindra, the country’s largest SUV maker, slipped 28%.
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India’s largest carmaker by market share, Maruti Suzuki, actually doubled sales in August, mainly due to a weak month last year when labour unrest resulted in a factory shutdown.
The company said combined domestic and international sales of passenger cars, utility vehicles and vans grew to 87,323 units from 54,154 a year earlier. Domestic sales rose 51.6% to 76,018 units while exports saw a 180% increase to 11,305 units, up from 4,025 in August 2012.
Toyota saw its sales decline 6.3% during the month to 15,201 units. Sandeep Singh, deputy MD and COO, marketing and commercial, said: “”The market is still sluggish, however we hope to see the market improve with good monsoon and the upcoming festive season.”
Toyota has also increased prices by 1% on some of its best-selling models.
Mahindra has let go about 1,000 temporary and contract workers over the past two months and said there would be up to six “no production” days per month at its automotive plants in the months ahead. Maruti Suzuki is adjusting its number of temporary workers to reflect weak production but did not give further details.
However, big ticket sales usually pick up in India in September, the beginning of the festive season which runs until the end of the year. To take advantage of this carmakers are rushing to launch new or refreshed models.
The fall in the rupee, down 17% since the beginning of the year, is adding to the problem because the industry is heavily reliant on imported auto parts. Some foreign automakers, such as General Motors and BMW, have had to raise prices and more are expected to follow.
Local auto executives have called for government action. Pravin Shah, head of Mahindra’s automotive division, said: “Immediate action by the government is needed so as not to lose out on the upcoming festive season wherein sales could look up and bring some cheer for the auto industry.”
