With car sales recording a volume growth of 15% and two-wheelers continuing their upward march with 19% higher sales during August, the beginning of this year's festival season has brought cheers to the Indian auto industry

August 2014 proved to be a splendid month for Indian auto industry, which witnessed strong volumes across all segments, except light commercial vehicles (LCVs). During the month, car sales recorded a volume growth of 15% while two-wheeler continued its upward march with 19% higher sales.

"Volume growth is likely to improve further as economic growth recovers. On a year-on-year (yoy) basis, September will likely be very strong month, as the festival season (Dussehra-Diwali) is largely bunched up in October this year as compared with the October-November period last year," says Nomura in a research note.

The domestic auto industry has been going through a challenging phase for the last few years. The overall slowdown in the gross domestic product (GDP) growth, high inflation, interest rates and fuel prices have had an adverse bearing on auto sales.

According to CARE Ratings, major OEMs have announced new launches especially in the passenger vehicle and two-wheeler segments. It said, these launches and the upcoming festival season should augur well for the channel and help in sales growth and improvement in credit profiles of the dealerships.

"Going forward, while the excise duty reduction will keep the vehicle prices lower and give an impetus to the sector, the improvement in the fundamental macro factors like tapering of

inflation and lowering of interest rates etc. is what will lead to a sustainable improvement across the sector in the medium term," it added.

To encourage automobile sales, the United Progressive Alliance (UPA) government reduced excise duty on automobiles in the Interim Budget.

This concession was extended by another six months, till 31 December 2014 by the Narendra Modi government in its pre-budget announcement.

Coming back to August 2014, medium and heavy commercial vehicles (MCHVs) recorded a 10% volume growth during the month, first time in over two years, led by improved demand as well as low base effect.

In passenger car segment, Maruti Suzuki India Ltd (MSIL) and Hyundai Motor India helped the industry to record stronger than expected volumes with their robust performance. Especially, MSIL's passenger car sales jumped 30% to 82,823 units. This helped the company, a unit of Japanese Suzuki Motor Corp, to increase its domestic market share to about 54% in August compared with 50% in FY2014.

Nomura said, "Despite new launches (by competitors like Honda Amaze, Hyundai Xcent) MSIL D’zire volumes increased by around 40%. This is quite positive, in our view."

Within unlisted original equipment manufacturers (OEMs), Hyundai volumes increased by 19%, while Honda volumes increased by 27%. Volumes for most other multi-national OEMs, like Ford, General Motors, VolksWagen and Renault, continue to see steep declines during August.

During August, overall car industry volumes increased by 15%. Hatchback witnessed a growth of 9% while sedan volumes jumped by 30%. The growth in sedan segment was led by recent launches like Honda Amaze and Hyundai Xcent as well as old horse Maruti D'zire.

Newly launched Hyundai Elite i20 sold about 6,600 units while Tata Motors Ltd, the country's largest vehicle maker, dispatched around 2700 units of its newly launched Zest model. On the other hand, Datsun Go failed to impress with sales of only 1,100 units in August 2014.

In the utility vehicle (UV) space, Honda Mobilio helped the segment to record 16% growth. During the month, Honda Mobilio sold about 5,500 units.

Talking about Mahindra & Mahindra (M&M), the largest UV maker in the country, Nomura said, "We note that Scorpio volumes were surprisingly weak (down 32%); however, XUV5oo volumes remained strong with about 2,800 units or 26% growth.

Bolero volumes were largely flattish, while Xylo and Quanto continue to see big declines."

Nomura said, despite strong industry volumes, key models from several OEMs saw a big decline during August. Ford Figo, Cheverolet Beat, Nissan Sunny and VW Vento saw volume declined by 30% to 60%.

Two-wheeler strong run continues

During August, two-wheeler segment continued its strong run and reported a health growth of around 19%. Bike volumes increased 14% while scooter sales jumped 30% during the month. The growth was led by TVS Motors, Honda Motorcycles and Scooters India (HMSI) and Hero MotoCorp Ltd, all of which posted double-digit growth. Bajaj Auto continued to lag, reporting a flattish growth of 2.1%.

HMSI's domestic volumes rose 27% to 3.71 lakh units, led by robust growth of 48% in its scooter segment. This helped the unit of Japanese Honda Motor Co Ltd, to consolidate its market share to 27.6% compared with 24% in FY2014. With its bike volumes declining by 9%, Bajaj Auto's lost its market share. Its market share in August was 10.2% as against 14.2% in FY14. Led by strong volumes in bike segment, Hero MotoCorp's domestic volumes increased 19% during August.

Interestingly, in two-wheeler segment, while lower-end (less than 110cc) and premium (above 125cc) bikes saw a growth of 24% and 16%, respectively, mid-range (110-125cc) volumes fell 18%.

In the MCHV segment while August was a good month for truck sales (up around 20%), volumes in bus segment fell to 26%. Even within truck segment, volumes in higher tonnage (above 16 tons) outperformed lower tonnage (between 7.5 to 12 tons) units. Volumes for 16 tons and above increased 38% during August.

LCV volumes deteriorated further during August. Sales volumes in less than 2 tons remained weak and fell by 20% while volumes in pick up (2 to 3.5 tons) segment declined by 7% during the month.

Festive season offers

Maruti Suzuki is offering region-specific festive accessory packs, which includes a selection of five or more accessory options for the customer to chose. For example, its Durga Puja celebration box has an image of the Goddess in an acrylic frame with an aroma dispenser among other things like sun visors, pedal, back cushion, car frame and tissue case.

Datsun Go is offering benefits of about Rs38,000 to customers during the festivals. This includes an exchange benefit of up to Rs20,000, insurance support worth R4,000, free extended warranty worth Rs4,000 and an additional discount of Rs10,000 on Datsun Go D, D1 & A variants.

Renault is offering an extended warranty of 2+2 years or 80,000 kms besides assured gift and free insurance on the RxE variant of its Duster, SUV. However, this offer is valid till 15th September only.