Pune: Passenger vehicle sales would continue to decline for top carmakers, with potential buyers shying away from showrooms due to increased cost of finance and total ownership.
While auto majors have reported a dip in May sales, Hitesh Goel, Senior Auto Analyst at Kotak Insti-tutional Research, attributed this to inventory corrections, and said the actual picture would be clear when the Society of Indian Automobile Manu-facturers, the trade body, releases aggregate May sales data later this month.
The Federation of Auto-mobile Dealers Association or FADA, the apex body of the lobby, said the inventory levels have come down, but are still high by its estimate.
"The gap (in the sales fall percentage) between retail and wholesale volumes ind-icate high levels of inventory in the industry," Ashish Kale, President at FADA, told Financial Chronicle.
He said companies were now maintaining inventory of 40-50 days. Due to corrections in production effected by them in the last few weeks, the inventory has come down from 50-90 days. Kale said FADA is advocating for a leaner dealer inventory of 21 days (15 days inventory + 7 days of in-transit inventory) for its members.
"This will help us reduce a huge cost burden and allow us to stay afloat in these challenging times," he pointed out.
FADA claimed that there has been an unusual rise in dealership closures in recent times, especially in metros and Tier 1 cities, a substantial number of which were due to financial stress caused by accumulated losses and reduced access to working capital.
Maruti Suzuki, the barometer of the country's passenger vehicle industry, Hyundai, Mahindra & Mahindra, Honda Cars, Toyota Kirloskar Motor, and Tata Motors reported negative sales in May, ringing alarm bells for a tough year ahead for the industry.
Automakers curtailed dispatches to dealers amid slowing sales and piling up inventory stocks.
Sales at Maruti Suzuki, which sells one car out of two bought, fell sharply 25.1 per cent in MAy. At Tata Motors sales the fall was 38 per cent, at Honda Cars, 28 per cent, at Toyota 7 per cent, at Hyundai Motor 5.6 per cent and at Mahindra 1 per cent.
The automakers in the country count dispatches from factory gates to dealerships as sales. Due to fear of inventory building up from weak market sentiments, they cut down on dispatches.
In May, Maruti Suzuki delivered 1,21,018 cars, down from 1,61,497 units dispatched in the same month last year. This was the third monthly decline.
Sales at Hyundai Motor India fell 5.6 per cent to 42,502 units from, down from 45,008 units.
Sales at M&M, India's second biggest utility vehicle maker, also fell 1 per cent at 20,608 units, down from 20,715 units it sold last year.
"While consumer sentiment and demand continued to be subdued during the pre-election phase, our focus has been on correcting the channel inventory," Rajan Wadhera, President, Automotive Sector at M&M, said.
Sales at Tata Motors, which had a good run for some time, too were hit hard. It sold 10,900 units, down from 17,489 units it sold last year.
"In view of higher vehicle stocks in network, our strategy was to focus on retails," said Mayank Pareek, President, Passen-ger Vehicles, Tata Motors.
He hopes that the industry will start improving gradually.
Sales at Honda Cars India were also down 27.87 per cent to 11,442 units in May, down from 15,864 units.
"The market continues to be tough for the auto industry with two consecutive months of such a high de-growth. It is unprecedented in the last two decades. After elections, we were expecting an upswing which has not yet come," said Rajesh Goel, Senior VP and Director, Sales & Marketing at Honda Cars India.
Sales at Toyota Kirloskar Motor also fell 7.43 per cent at 12,138 units, from 13,113.
"Customer demand had witnessed a continued slowdown before the election results," said N Raja, Deputy MD at Toyota Kirloskar Motor.
He said other factors like liquidity tightening, high insurance costs, and rise in fuel costs have also weakened the retails. "However, with the formation of a stable government now at the Centre, there is an increase in customer walk-ins after the election results announcement," he said.