The Hindu Business Line : A buzz beyond the numbers

IT HAS been a rather interesting first two months for the automobile industry in the current financial year. Companies have reported diverse sales trends with some recording a growth and others, a fall in sales. In the process, the trends for the industry as a whole as also individual segments provide confusing signals. After the heady growth rate in 2004-05, the commercial vehicles segment suffered a fall of 6.5 per cent in its sales for the April-May period. The reason was, however, not a slowdown in offtake of vehicles; in fact, both Ashok Leyland and Tata Motors said that the overall market trends are quite comfortable.

What caused the fall was the problem faced by Tata Motors in regard to supply of Euro-II-grade components for its vehicles. The company's sales fell 7.3 per cent in May following the 30.5 per cent drop in April dragging down the fortunes of the entire industry. In contrast, Ashok Leyland reported a good growth in the same period with sales growing 12 per cent; May sales alone were up 19 per cent.

This proves that the overall market trend is positive; a fact that Tata Motors also endorses. Mr Ravi Kant, Executive Director, Commercial Vehicles, Tata Motors, is on record that the demand is quite strong in most parts of the country. When the leading player in the market with a share in excess of 70 per cent runs into problems meeting demand, there cannot but be a fall in the overall growth rate of the industry. This is what has happened to the commercial vehicles segment in the first two months of this financial year.

The crucial period for commercial vehicle sales is only just beginning with the onset of the monsoon. Traditionally, a good monsoon has proved beneficial to the industry. The next three months could well determine the prospects for the industry in the current financial year.

Passenger cars

Trends in the passenger car segment were even more interesting than commercial vehicles. Market leader, Maruti Udyog did not have a very good first two months while the second largest player, Hyundai Motor, bounced back in May with a 73 per cent rise in sales in the B segment with the Santro and Getz models. Tata Motors' domestic car sales were flat in May but cumulative sales in the first two months were higher by 10.3 per cent.

Maruti appears to be suffering from model fatigue and falling sales of the M-800. It is interesting to note that despite the large number of bookings for the Swift, which was launched in the last week of May, Maruti's domestic car sales, excluding utility vehicles, grew by just 5.5 per cent in May 2005 compared to May 2004. Its total sales the first two months of 2005-06 fell 4.2 per cent mainly due to lower exports and falling sales of the M-800. Clearly, there is a lot riding on the Swift for Maruti as sales of its other models are beginning to slow. While the initial response to the Swift is encouraging it remains to be seen if the interest is sustained as buyers begin to experience the car. The passenger car segment recorded a 13 per cent rise in sales in the first two months of the financial year and the outlook for the current fiscal appears good at this point in time.

New models such as the Swift and the Innova are likely to boost sentiment and sales. The drop in Santro prices announced with the launch of a new non-a/c variant could also stimulate sales. Hyundai's decision is a direct result of the interest generated by the Swift and the Korean major appears to fear that the latter would strike at Santro sales.

The lower end of the Swift is priced tantalisingly close to the high-end model of the Santro and could attract the latter's buyers. There are interesting times ahead in the passenger car segment as the leading players slug it out for market share. And needless to say, this is the best time for prospective car buyers as the competing players woo them with deals and discounts.

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