Indian passenger vehicle sales up over 6 percent in March, CV sales surge over 24 percent

11 Apr 2018 Isha Sharma

Utility vehicles once again drove growth in India's passenger vehicle market during March, with cars taking a backseat.

IHS Markit perspective

  • Implications: March's results for the Indian vehicle market were consistent with the trend of the previous two months as passenger vehicle sales grew 6.4% year on year (y/y) and commercial vehicle sales increased 24.5% y/y.
  • Outlook: For 2018, IHS Markit expects Indian car sales to remain at a high level and to register double-digit percentage growth. According to our data, Indian light-vehicle sales, including passenger vehicles and light commercial vehicles, are projected to grow by 10.4% y/y to 4.07 million units in 2018, while medium and heavy commercial vehicle (MHCV) sales will increase by 10.9% y/y to 380,765 units.

Passenger vehicle sales grew 6.4% year on year (y/y) in India during March, according to data released by the Society of Indian Automobile Manufacturers (SIAM). Automakers in the country sold a total of 300,722 passenger vehicles in the month, with robust growth coming from utility vehicles. This category witnessed a surge in sales of 17.7% y/y to 91,483 units in March, although it continued to trail the larger category of cars, which registered sales of 191,082 units in the period, up marginally by 0.4% y/y. A total of 18,157 vans were sold during the month, up 23.0% y/y. For the year to date (YTD), passenger vehicle sales are up 7.2% y/y at 861,528 units.

Commercial vehicles (CV) witnessed another solid month in March, with sales volumes totalling 108,681 units. This represents growth of 24.5% y/y. This growth was led by a surge in light commercial vehicle (LCV) sales to 62,921 units, up 31.3% y/y. Medium and heavy commercial vehicles (MHCVs) also posted a double-digit increase of 16.3% y/y to 45,760 units during the month. CV sales during the YTD are up 31.0% y/y at 282,118 units.

Total industry volumes (TIV) during March expanded by 10.7% y/y to 409,403 units. In the YTD, automakers in India have sold a combined 1.14 million passenger cars and CVs. The SIAM's figures represent automakers' dispatches to their dealers, rather than retail sales.

Outlook and implications

March's sales results are consistent with the trend of the previous two months and also builds on the momentum regained towards the end of 2017. In recent months, the passenger car segment has been boosted by the increasing popularity of utility vehicles. As well as this new-year demand, strong consumer sentiment, surging stock markets, and a revival of the economy have also helped to boost sales. In 2017, Indian light-vehicle sales grew 8% to 3.7 million units. This growth in 2017 can be mainly attributed to new model launches, lower finance rates, and increased production capacity.

In terms of individual performances by brand, Maruti Suzuki continued to lead the market in March, its sales surging 15.3% y/y to 147,170 units. India's leading automaker is benefiting from strong demand for its products. The automaker's sales last month were led by a 13.3% y/y increase in sales of passenger cars to 110,717 units, while its utility vehicles posted sales growth of 24.3% y/y to 22,764 units. Sales of vans grew to 2,704 units, compared with 1,660 units in the corresponding month of 2017. Second-placed Hyundai reported growth of 7.3% y/y to 48,009 units last month, helped by strong demand for its Elite i20 hatchback, Verna sedan, and Creta compact SUV. Mahindra & Mahindra's (M&M) sales grew 4.7% y/y to 26,531 units as the automaker benefited from the recent launch of the KUV100 NXT. Tata Motors reported a solid gain of 34.4% y/y to 22,970 units, recovering from last year's low base and aided by new model launches in the form of the Tigor compact sedan, Nexon compact crossover, and Hexa SUV. In the next two positions, Honda and Toyota's sales volumes dipped by 28.4% y/y and 9.1% y/y, respectively. Among the smaller automakers in the market, only Ford managed to post a sales gain (up 3.6% y/y), while Renault, Nissan, and Volkswagen posted lower sales. In the CV segment, automakers reported double-digit percentage growth rates in March as demand gained strength on the back of the implementation of the new goods and services tax (GST), which replaced several state taxes, resulting in the removal of inter-state checkpoints. In addition, demand is returning from the core construction and infrastructure sectors.

For 2018, IHS Markit expects car sales to remain at a high level and to register double-digit percentage growth of around 10% y/y; we have reduced this figure by 1 percentage point in our latest forecast round. The reduction in the forecast is in line with the 2018 budget, in which the government increased customs duty on electronic components from 7.5-10% to 15%. The duty on completely knocked down kits has also been increased from 15% to 20%, alongside a 5% rise for completely built-up models. In response, all manufacturers in India are raising their prices. Overall, market sentiment is positive thanks to factors including new and upcoming compact SUVs and hatchbacks. Higher government spending on various schemes will lead to an economic revival and will continue to drive growth. In the 2018 budget, there is a big boost for the rural economy and the government has allocated more funds to infrastructure, irrigation, education, and health schemes, which will help the economy. This money will trickle down to end users, and there may be a positive effect on car sales. With the Indian currency getting stronger, gasoline (petrol) prices are shielded and this will further help boost sentiment. Economic growth should speed up during the second half of 2018. According to our data, Indian light-vehicle sales, including passenger vehicles and LCVs, are now projected to grow by 10.4% y/y to 4.07 million units in 2018, while MHCV sales will grow by 10.9% y/y to 380,765 units.

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