Auto sector update - March 2007

Automobile sales volumes for the month of March were more subdued than expected and have raised fears of a slowdown in demand growth because of rising interest costs and decline in overall economic growth. March has traditionally been the best month for auto sales, especially commercial vehicles, as many consumers choose this month for getting depreciation benefits. However, sales for the month were not disastrous either and most companies managed decent growth.

Total Vehicles March 2007
Domestic
Exports
Total
% growth y-o-y
Feb 2007
Tata Motors
56,480
6,299
62,779
11.30
53,707
Maruti
64,556
7,216
71,772
13.57
62,999
Hyundai
19,300
8,939
28,239
(5.99)
25,026
M&M
26,922
1,506
28,428
19.82
20,749
Ashok Leyland
7,936
508
8,444
(1.55)
8,036
Note: Volumes of M&M include tractors and 3-wheelers

Passenger Vehicles - Domestic
March 2007
March 2006
% change
Feb 2007
Maruti
64,556
61,141
5.59
59,095
Tata Motors
25,760
22,596
14.00
21,322
M&M
15,210
12,305
23.61
9,486
Hyundai
19,300
22,524
(14.31)
15,459

Though Maruti managed a healthy 13.5 per cent rise in total sales for the month, it was mostly achieved through a sharp rise in exports. Export volumes increased substantially to 7,216 units from 2,055 units for the same month of last year. Domestic sales growth was a subdued 5.6 per cent.

The A2 or premium hatchback segment continued to drive sales growth for Maruti, with a 26.25 per cent rise in monthly sales to 47,068 units. Sustained demand for older models like the Alto and Wagon R besides new models like the Swift and Zen Estilo continue to help the company. Sales of entry level hatchbacks and sedans declined appreciably during the month while sales of passenger vans were more or less steady.

Hyundai had a disappointing March as sales volumes declined after a sharp jump in sales for February. The decline in domestic sales was more than export sales, where the company retains its position as the largest automobile exporter from the country.

Its hatchback model Santro and entry level sedan Accent are ageing and may have a tough time to sustain sales growth. The company has recently launched an upgraded version of its premium hatchback Getz. Going forward, Hyundai is planning to introduce a new car, positioned between the Santro and Getz. The company would also launch a diesel-powered Getz and a CNG-powered Santro before the end of this calendar year.

Though the percentage growth for Tata Motors slowed down, the company managed to achieve its highest-ever monthly sales for some of its models. Indica sales crossed the 15,000 mark in monthly sales for the first time ever while SUV model Safari sold 2,150 units, the highest in any month since launch. Indigo sales continued to decline on a year-on-year basis, but gained over the previous month. Tata Motors said the Indigo sedan and Marina station wagon with common rail diesel engines have received good response in the market.