If a nation’s economy takes to the wheels, then the cars and luxury sedans will race down on the speedways! Exactly, that’s what is happening in India right now. It’s an accepted fact that the number of auto sales represents the growth of a country’s economy. It’s a different matter altogether if it adds to the traffic woes in the crowded cities of the country. But auto sales are like a barometer to a nation’s economic health. The Indian stocks are zooming ahead so are the auto sales in the country. This festive season saw auto sales in the country touching a new high in the country.
Incidentally, almost all the automakers posted record sales this October, with the festive season drawing more customers to showrooms and dealers also stocking up to meet demand. Market leaders in four-wheeler segment Maruti Suzuki India sales touched a new high with one lakh units sold in just one month. It’s not just Maruti Suzuki, several other automakers made most of the festive season with TVS Motor Co, Tata Motors, Hero Honda Motors, Mahindra & Mahindra. Toyota Kirloskar Motor, Ford India, Hyundai Motor India and General Motors India — all posted higher sales in the month.
In fact, Maruti posted a 39% jump in sales to 118,908 vehicles. Despatches in October were the highest in a month, beating the previous high of 108,006 units in September and making the October the fifth month ever when sales in any month crossed the 100,000 mark. This October, even domestic sales breached the one lakh unit sales for the first time ever at 107,555 units. As per its capacity expansion plan, Maruti raised output at its two factories by 10% last month to meet increased festival season. Capacity constraints have led to waiting periods of 15 days to a few months on as many as 11 of Maruti’s 15 car models. Sales of Maruti small cars, including the Alto, Alto-K10, A-star, WagonR, Ritz, Estilo and Swift, rose 51% from a year earlier to 77,502 units, while sales of sedans SX4 and Dzire jumped 32% to 11,621 units. Maruti also sold 15,379 Omni and Eeco multipurpose vehilces, up 50%, while sales of Gypsy and Vitara SUVs more than doubled to 422 units. Exports, however, dropped 18% to 11,353 vehicles.
Tata Motors, India’s biggest auto maker by sales, saw passenger vehicle sales rise by 22 per cent to 24,478 units. The company dispatched 3,065 Nano mini cars, up 2% from a year earlier but down 44.5% from the 5,520 cars sold in September; 8103 units of the world’s cheapest car were sold in August.
Sales at Mahindra, India’s largest utility vehicle maker by sales, were up 34% at 34,495. The company sold 15,908 units of its SUV Scorpio and utility vehicles Xylo and Bolero, up 21%. Exports more than doubled to 2,004 units. Ford India’s sales also surged to 9,026 vehicles from 3,458 a year earlier, boosted by strong demand for small car Figo, which it launched this March. Figo sales since launch crossed the 50,000 unit mark (at 52,644 units) and the company extended its footprint by opening dealerships in Kathmandu.
Toyota reported 17% growth to 6,602 vehicles (5,650 vehicles) while . Toyota’s Etios small car is scheduled for launch on December 1. Hyundai Motor India Ltd. posted its highest-ever local sales of 34,725 vehicles in October, up 23% from 28,301 a year earlier. Exports, however, fell 25% to 17,500.
In two-wheelers, Hero Honda sold a record number of two-wheelers in October. Sales crossed the half million mark to 505,553, up 43% from 354,156 units and beating the previous high of 435,933 in May. TVS Motor’s two- and three-wheeler sales rose 48% in October to 195,271 units from 131,941 a year earlier, surpassing the previous monthly high of 188,005 in September.
Motorcycle sales at the country’s third-largest two-wheeler maker by sales grew 49% to 84,233 units, while scooter sales jumped 58% to 44,659. General Motors India said its sales rose 36% to 10,051 units, helped by higher demand for the Beat and the Spark.
And, what makes the auto industry take the high speed route. In simple words, it’s the rising Indian economy. Despite the fact that many countries still reeling under the recession effect, Indian economy has been consistently doing well. “The Indian economy is on the path of recovery and will soon go back to robust growth rate of around nine per cent although inflation is a major area of concern,” Union Finance Minister, Pranab Mukherjee said recently setting the tone for the market surge. Inaugurating the second annual conference of Finance Secretaries and Commissioners of States and Union Territories, Pranab Mukherjee said that recovery will span agriculture, industry and services and growth is estimated at 8.8 per cent in the first quarter of the current financial year. “With the current recovery in sight, we have returned to path of fiscal consolidation. With a calibrated unwinding of transient expansionary fiscal policy, we expect to close the current year with a fiscal deficit not exceeding 5.5 per cent of GDP as estimated in the Budget,” Mukherjee said.
The Minister said that the Government has taken a number of anti-inflationary measures to bring down inflation which has moderated to 8.6 per cent in September this year from the headline inflation of 11 per cent at the beginning the current financial year. Mukherjee said that the Union government has requested the states to strengthen their public distribution systems to ensure that the vulnerable group of society is not adversely affected by the current level of inflation. The minister also asked the state finance secretaries to take appropriate steps in this regard so as to bring down inflation to more acceptable levels. Mukherjee said that in 2011-12 and 2012-13, the government has projected fiscal deficit of the Centre to further reduce to 4.8 per cent and 4.1 per cent of GDP respectively. The debt stock of the Centre is also projected to come down to 48.2 per cent of GDP by the end of 2012-13 according to the medium term fiscal policy statement 2010-11.
In this backdrop, the festive season sales touched a new high. And the market celebrated the occasion with a big applause with scripts touching a new all-time high in one hour of ceremonial trade to mark the Diwali festival. The benchmark 30-share Sensex index rose 0.53% or 111.39 points to a record close of 21,004.96, marking its fourth straight day of gains. The markets have seen a surge in buying of newly-floated Coal India, improving global liquidity and strong foreign interest for fast growing domestic firms. The Sensex’s previous highest close was 20,893.57 and it last crossed 21,000 points nearly three years ago in January 2008.
The stock markets open for a one-hour token ‘Muhurat’ (auspicious beginning) trading late evening on Diwali day. Traders buy stocks to seek blessings from the goddess of wealth Lakshmi in hopes of prosperity in the coming trading year. On the auspicious Diwali day, shares have seen a buying spree in auto, metal and healthcare stocks.
The leading index on the Mumbai Stock Exchange has risen 20.2% this year, led by record overseas fund flows of 26.7 billion dollars, and strong economic growth of nearly nine percent in the fiscal first quarter. With the record rise, India’s Sensex index has become one of the top performing major markets in the world.
Though auto sales have reached record highs, industry watchers see a post-Diwali slump happening. “There can be a slowing down of sales in the next couple of months,” warned a market analyst. However, auto makers are hopeful of continuing the robust sales and they are banking on good crop yield. But the decision of the Reserve Bank of India to rise the intereste rates may prove to be a dampener for auto sales.
But, auto makers are lining up several new models to continue their growth path in the coming months. Come December, the market leader in the four-wheeler segment Maruti Suzuki Limited is coming up with its small car Cervo, which can compete with Tata’s wonder small car Nano. is one of them which is eagerly awaited among the Maruti fans in the country. The automobile manufacturer that created waves in the country’s small car segment with the launch its poplar small car the Maruti 800cc, now aims to get back the entry level supremacy with the Cervo launch. The Cervo is expected to come with a price tag between Rs. 1.5 lac and Rs. 2 lakh. It remains to be seen whether Maruti Cervo will be able to impress its Indian audience in the small car segment given the fact that Tata Nano has taken the Indian car customers by storm. As of now, Maruti definitely seems to have an over Tata Nano which now is no more a ‘Rs one lakh car’, given another price revision by Tata Motors that makes it dearer by Rs 9,000. Moreover, Maruti is the household name in small car segment that it has earned after decades of hard work and customer car service. And, it will be interesting to see how the markets react to this latest competition in the coming months.