SIAM forecasts 6-8% growth for PVs in H2

The Society of Indian Automobile Manufacturers (SIAM) today announced the sales numbers for the first half of fiscal 2015-16 (April-September 2015). While full recovery across vehicle segments is not achieved, sales are beginning to pick up in those segments which are not dependent on rural markets.

Passenger vehicles, for instance, are expected to close 2015-16 with a moderate growth of 6-8 percent. Their earlier peak growth was witnessed in 1999-2000 when the segment grew 48.6 percent. The utility vehicle segment, which has been a laggard till now declining 8.56 percent in September and 2.56 percent during April-September 2015, is expected to start recovering on the back of several new launches, said Sugato Sen, deputy director general, SIAM.

SIAM data for September 2015 indicates that passenger car sales have risen at 9.48 percent for the 11^th consecutive month with the peak being witnessed earlier in April 2015 at 18.14 percent. However, not much of a sales boost is expected from the festive season with the benefit of lower interest rates still to be extended by nationalised banks. Maximum sales are projected as always in March due to it being the year closing.

The overall backdrop though indicates a positive consumer sentiment, and increasing disposable incomes for supporting growth in the auto industry. Interestingly, the cost of ownership is expected to remain stable in FY’16 for petrol vehicles. For diesel vehicles, it is estimated to be lower by 2-4 percent compared to FY15 with petrol and diesel prices expected to decline by 6-8 percent and 12-14 percent respectively.

Though interest rates have decreased slightly after the recent 50bps rate cut by the Reserve Bank of India, lending rates are expected to further decrease with banks passing on the lower duty. With lower commodity prices, higher discounts are expected to continue, fueling demand. Rural sentiments, however, are expected to remain subdued.

MOTORCYCLE SALES TO START GROWING

While on the one hand, motorcycle sales are forecast to start growing on a low base, scooter sales will slow down over a high base of last year. In FY16, motorcycle sales will remain flat due to the continuing slowdown in the rural economy that accounts for almost 40 percent of commuter bike sales. The crop value output is expected to grow marginally (0-2 percent) on expectation of a better rabi crop but may not be enough to breathe adequate life into two-wheeler sales. Growth rate of scooter sales is also expected to slow down due to the impact of the rural slowdown that will affect sales in semi-urban markets.

The rural impact will also be visible in another segment driven by the rural economy – light commercial vehicle (LCV) demand will remain flattish due to slow revival in private final consumption expenditure and weak financing participation. With rising levels of non-performing assets, the financing scenario is unlikely to recover in FY’16 as financers will remain tightfisted and more keen to focus on loan collections.

However, sales of the medium and heavy duty commercial vehicle sector (M&HCV) are expected to grow in double-digits on the back of expected improvement in industrial GDP to about 6.5 percent and higher replacement demand. Between April-September 2015 the segment has grown 33.68 percent.

A rise in infrastructure development, mining and quarrying works will lead to further improvement in the industrial output, boosting M&HCV demand. Also due to expectations of regulatory changes like fitment of ABS and speed governors some sales have been advanced.

During April-September, tractor trailer demand also increased due to growth in passenger car movement, improvement in steel and cement movement as well a rise in container traffic for exports. Further, tippers are expected to recover in the latter half of the fiscal due to a stepping up of construction and mining activities.

The outlook for the bus segment is also bright in FY16 with demand for LCV buses, especially school and staff buses, growing. Replacement demand from the tourist segment is likely to rise in the second half of the year. In the M&HCV bus category, improving profitability of operators due to low diesel prices is expected to boost this segment supported by replacement demand which was extended from the previous year. Demand from intercity travels will also support growth while demand from the corporate sector will grow moderately while private route permit operators demand will be steady.

In addition, replacement demand and growth on a  lower base of last year especially in terms of buses bought by state transport undertakings will also provide a fillip to M&HCV sales.

Vinod K Dasari, president of SIAM, said that the funds dilemma bogging AMRUT or the JNNURM II scheme has been resolved. Orders for about 3,500 buses are approved and sanctioned while 4,500 bus orders are expected to be placed and fulfilled in the next two quarters. About 70 percent of them will be in the MCV category.

Reversing the ongoing declining trend in three-wheelers, FY’16 is likely to see a marginal growth propped up by sales in the second half of the year. These will be driven by permits and replacement demand. Permits have been released for passenger three-wheelers in Maharashtra, Andhra Pradesh, and Uttar Pradesh to give a leg-up to demand for three-wheelers. Replacement demand will further continue to support volumes in passenger three- wheelers and small four wheelers. However, weak consumption and recovery in the rural economy will affect sales in the cargo segment.

Dasari pointed out that the fleet modernisation scheme will give a fillip to demand for new  trucks, help conserve the environment and improve the tax revenue for the government. But the government needs to look at how to ensure vehicle scrappage and how to pass on the incentives to the customer for buying new vehicles.

SIAM has been petitioning with the Ministry of Heavy Industries for passing legislation for fleet modernisation for some now.  

"The growth in the Indian automotive industry this year so far has not been up to its potential. The increase in September 2015 in passenger car sales is mainly driven by new launches especially compact SUVs and hatchbacks. Sales of M&HCVs continues with its growth trajectory in anticipation of a pick-up in the Indian economy as well as pent-up demand. Motorcycles, UVs and LCVs especially goods carriers continue to struggle due to low off-take in the rural market. Scooters are getting more popular with urban customers for personal mobility and this trend will continue, though the growth is moderate in September. The festive season will be key for automakers and hopefully customer sentiments should improve with many favourable factors such as low interest rates, low inflation, kick start in government investment in infrastructure," summed up Abdul Majeed, partner, PW and auto expert.