India

India Light Vehicle Sales Update
December 2019

Recovery in sight?

India’s Light Vehicle (LV) wholesales outperformed our expectations and surged for the second straight month in November 2019. The total volume stood at 308k units, a 2% decline year-on-year (YoY).

Wholesales were boosted by improving retail demand for Passenger Vehicles (PVs), due to the festive season, aggressive discounts, new model launches, and the increasing availability of BS-VI-compliant models.

PV deliveries inched up by a slight 1% YoY to 255k units in the month. However, demand for Light Commercial Vehicles (LCVs) up to GVW 6 tonnes slumped by 14% YoY to 53k units.

The November SAAR was 3.86 mn units, unchanged from October, but a considerable improvement from an average SAAR of only 3.26 mn units between April and September 2019.

The industry appears to have embarked on a slow road to recovery, but several factors – not least tight credit conditions and the transition to BS-VI emissions standards – could create obstacles or delays.

“Although better than what the situation was during pre-festivals, liquidity and credit confidence both for retail customers as well as dealers is still not near the normal levels required for sustained growth with the banking and finance industry still at the cross roads of business aggression and business caution, despite strong advocacy of retail credit growth by the government,” cautioned Ashish Harsharaj Kale, President, FADA.

The difficult market conditions resulted in total LV sales falling by 13% YoY to 3.24 mn units between January and November 2019, consisting of 2.61 mn PVs (-13% YoY) and 633k LCVs (-12% YoY).

We had previously assumed that a larger number of consumers would buy BS-IV vehicles, which are being offered at heavy discounts to clear stock, instead of buying the costlier BS-VI models. However, many have opted to purchase BS-VI vehicles, despite their higher prices, as they offer better technology and resale value.

Another factor driving sales of BS-VI vehicles is the early launch of these models by market leader Maruti-Suzuki. The automaker converted eight of its very popular models to BS-VI as early as April 2019, well ahead of the April 2020 deadline, and they are proving popular with consumers, despite the depressed market conditions.

Three new entrants in 2019, the Hyundai Grand i10 NIOS, Kia Seltos and MG Hector, all meet BS-VI regulations and have been doing well, too. The Toyota Glanza, Renault Triber and Jeep Compass Trailhawk are also among the models that are BS-VI ready. In November, BMW announced that it had upgraded its entire range of gasoline models to BS-VI. Mercedes-Benz, meanwhile, will stop selling BS-IV vehicles by early 2020.

And while the BS-VI models are performing well, automakers still expect a rush for BS-IV vehicles before the 1 April 2020 deadline as they will need to liquidate them, even at heavy discounts, as has been evident since Q4 2019.

The stronger November sales led to minor upward adjustments in the 2019-2022 forecast. LV sales are now forecast to have declined by 12% YoY to 3.52 mn units in 2019, the largest annual contraction since 1989.

The 2020 forecast remains cautious, with only 1% YoY growth, on sales of 3.55 mn units. With that said, the risk is now on the upside.

 

For further information contact Ms. Sukanya Tunhau
Phone +662 264 2050

 

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