Passenger vehicle sales decline in December due to low consumer sentiments

The domestic passenger vehicle market faced headwinds in December as sales dropped for a consecutive month. Sales fell across the segments as rising fuel and commodity prices hit consumer sentiments.

Data released by the Society of Indian Automobile Manufacturers (SIAM) on Monday showed sales of passenger cars, the largest segment by volumes, in December fell 2.01% to 155,159 units, from 158,338 a year ago. Overall, sales of the passenger vehicle segment—including cars, utility vehicles, and vans—dropped 0.43% to 238,692 units in December from 239,723 units in the corresponding month the previous year.

The commercial vehicles (light, and medium, and heavy vehicles), which is generally a healthy segment by sales, also faced a dip last month. Its domestic sales fell 7.80% to 75,984 units in December from 82,409 units a year ago.

Sales of the two-wheelers, the second-largest segment by volume, also fell—from 1,287,766 units in December 2017 to 1,259,026 units last month—a drop of 2.23%.

However, the total number of exports grew 2.59%, despite total production took a hit and fell 0.70% to 1,916,101, from 1,929,528 units in December 2017.

SIAM, in its third quarter review, said that commodities like steel, copper, natural rubber and aluminium are expected to move up in the forthcoming quarters, putting pressure on the automobile industry.

In the third quarter, the cost of steel was Rs 43 per kg; it is projected to move up to Rs 47 per kg in the fourth quarter. Similarly, pig iron prices are expected to touch Rs 33 per kg from Rs 31 in the third quarter, according to SIAM.

SIAM said that global factors like a slowing world economy (China and the EU) and ongoing the trade wars between the U.S. and China will pose a major challenge to India’s auto industry.

“Political uncertainty and consumer sentiments are other challenges,” SIAM said in its review.

However, some of the key growth drivers, according to SIAM, will be the government’s continued focus on agriculture and rural development and pre-buy of BS-IV vehicles in F20 before BS-VI implementation. SIAM also expects the monetary policy to be stable with no major increment.