Subdued consumer sentiment casts shadow

Subdued consumer sentiment due to uncertain economic environment continued to cast a shadow on car sales which registered the biggest monthly decline since May last year of 10.15 per cent in April. The recent cut in excise duty on automobiles too failed to spur demand.

Passenger car sales in April stood at 135,433 units against 150,737 units in the year-ago period, according to data released by the Society of Indian Automobile Manufacturers (SIAM). “This is the biggest decline since May 2013, when car sales dropped by 11.7 per cent,” SIAM Deputy Director General Sugato Sen said. “What is happening is that we are unable to recover from the negative sentiment. We need a trigger to change the sentiment,” he added.

Mr. Sen said the change would be possible only after a new government came to power and announced measures to kick-start the economic growth during the full budget.

“The current rate of 4-5 per cent growth is not enough. For a healthy growth of the automotive sector, we need the economy to grow at over 7 per cent,” he said, adding the forecast of a deficient monsoon was also a concern.

Asked why the reduction in excise duty has not resulted in demand surge, he said, “Today, even after the cut, the cost of ownership is extremely high. The small car customers are the most vulnerable under the current circumstances.” Cost of ownership is impacted by factors such as high interest rates, fuel prices and inflation, which are now on the higher side. Mr. Sen, however, pointed out that the only silver lining is that footfalls at dealerships have increased. However, people were still holding back on purchases.

Two-wheelers, on the other hand, continued to grow. As per the data, total sales of two-wheelers in April grew by 11.67 per cent to 13.04 lakh units from 11.68 lakh units in the same month last year. While motorcycle sales grew by 8.06 per cent to 9.11 lakh units, scooter sales were up 26 per cent at 3.29 lakh units.

Commercial Vehicles segment too continued to reel under prolonged slump with sales registering a decline of 24 per cent to 43,080 units. Mr. Sen said with the ban on mining being lifted, there could be some improvement in the segment in the coming months.

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