Headline

Passenger vehicle sales to witness worst decline in a decade

Published On

Oct 15, 2013

Abstract
Passenger vehicle sales are expected to decline by 8-10 per cent in 2013-14, led by persistent weakness in consumer sentiments due to weak income growth and uncertainty of growth in incomes in the near term. The continued state of high inflation, fuel prices and firm interest rates will continue to deter growth in 2013-14.

Key Issues
- What is the short-term outlook for demand growth? -

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No part of this Report may be published/reproduced/distributed in any form without CRISILs prior written approval.

Passenger vehicle sales to decline in 2013-14

Key forecast for the cars and utility vehicles segment

Note: P: Projected; YTD: Year-to-date; H1: Half year

CRISIL Research expects sales of cars and UVs to decline by 8-10 per cent in 2013-14, due to the following reasons: Anticipation of weak economic growth (lower GDP growth projections), translating into weak consumer sentiments Sharp rupee depreciation, causing petrol prices to escalate by 3-5 per cent during the year Expected hike of 18 per cent in diesel prices, impacting sedans and utility vehicles sales Firm lending rates Weak demand momentum exhibited by a sharp volume decline of 5 per cent during April-September 2013 despite low base (on account of production disruptions at Maruti Suzuki India's Manesar plant) Decline in volumes during April-September 2013 demonstrates that consumer sentiments are extremely weak. We do not expect sales to recover, as hike in petrol prices and firm lending rates will prevent any meaningful recovery. Additionally, sales of utility vehicles (including vans), which posted a sharp growth of 32 per cent in 2012-13, is also showing signs of moderation, with YTD (April-September 2013) sales declining by 7 per cent. We expect hike in diesel prices and the waiting period for Ford's EcoSport to impact sales in the near term, causing the segment to post a decline of 6-9 per cent for the full year (2013-14).

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