Auto sales dip in March on rising interest and weak demand

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Weak consumer sentiment, along with a rise in borrowing costs and increased fuel prices dented domestic automobile sales last month, a research note said on Wednesday.

According to a report from India Ratings and Research, domestic automobile industry's sales volume declined 14 per cent yoy (Year-on-Year) in March 2019.

The report mentioned that commercial vehicles' sales in March remained muted on account of slow performance of the core sector amongst other factors.

"Moreover, the new axle load norms have increased the maximum load carrying capacity of existing vehicles; consequently, despite an increase in demand for transportation, demand for new trucks declined," the report said.

In addition, sales were affected by lower credit availability owing to a liquidity crunch in the non-banking finance company sector, which is the main source of funding for commercial vehicles (CVs).

"Sales of MHCVs (medium and heavy commercial vehicles) fell by 5 per cent yoy in March 2019," the report said.

"Meanwhile, sales of LCVs (light commercial vehicles) rose by 4 per cent yoy, propelled by a rise in construction spending, and steady demand from the rural economy and consumption-driven and e-commerce sectors."

On the passenger vehicles sales volume in March, the report said that sales fell due to weak buyer sentiments, higher insurance premiums and an increase in fuel prices as well as interest costs.

Furthermore, the lending environment is under pressure, and liquidity remains tight. Buyers are also delaying purchases on account of the elections.

"In March 2019, 2W (two wheeler) sales volume were constrained by higher insurance premiums, interest rates, and fuel costs and the regulation in West Bengal (a significant market for 2Ws) that permits the sale of 2Ws to only driving licence holders," the report said.

During the month, motorcycle and scooter sales declined by 14 per cent and 25 per cent, respectively.