Year end review | Business

Rough ride for automakers

Speed bumps:  Growth slowed towards the year end on   fuel price rise and high interest rates .

Speed bumps: Growth slowed towards the year end on fuel price rise and high interest rates .

The year 2018 was a challenging period for the automobile industry, more specifically for the passenger vehicle (PV) segment which faced strong headwinds.

The initial gains witnessed were discounted in the second half of the year on account of liquidity issues, confidence erosion, insurance issue and high oil prices.

“[The year] 2018 for the auto sector started off on a high note,” said Sridhar V, partner, Grant Thornton India LLP. “Commercial vehicles (CVs) and two-wheeler segments were on a roll with CVs especially supported by infrastructure growth. While PVs showed growth in the first part of the year, the pace of growth slowed down towards the end across segments with fuel price increase, NBFC issues and high interest rates,” said Sridhar V, Partner, Grant Thornton India LLP.

Disappointing season

“The festival season also disappointed the segment with almost tepid sales of PVs. The auto sector is still expected to end at close to 12-13% overall growth to previous year in the domestic market primarily fuelled by CVs and two-wheeler growth while PVs are expected to close at around 5-6% [growth],” Mr. Sridhar said.

During the year, exports grew significantly for CVs and two-wheelers while it has been in the negative zone for PVs due to weakness in export markets.

Vinodkumar Ramachandran, partner and head, industrial manufacturing and automotive, KPMG in India, said the automotive industry in FY18 grew by 14% with the major growth coming from two and three-wheeler segments. PV sales rose 8% over the last year and the rising popularity of UVs (utility vehicles) means this segment is likely to grow by 10% in FY19.

“Additionally, growth in infrastructure projects are driving the growth of MHCVs (medium and heavy commercial vehicles and LCVs (light commercial vehicles) thereby keeping the growth of CVs at 18% year-on-year.

CV market leader Tata Motors reported strong growth. “Our CV business delivered a strong sales performance and grew by 33% (approximately) over the last year. With a number of new product launches across various product segments, including full electric buses, Tata Motors CVBU (commercial vehicle business unit) is continuing to take the lead in shaping the Indian CV industry,” said Girish Wagh, president, CVBU, Tata Motors.

He said the growth in the CV landscape was also supported by various macro-economic factors such as heightened industrial activities, infrastructure development and increased demand in private consumption-led sectors. “However, some headwinds such as liquidity crunch, higher interest rates and fuel costs did lead to some muted consumer sentiment during the last two-three months,” he added.

The year 2018 also turned out to be a turning point for Tata Motors’ PV business which grew on the back of the new generation products.

Mayank Pareek, president – passenger vehicles business unit (PVBU), Tata Motors, said, “We started the year on a high note, as we clocked the highest sales figures in 63 months in January 2018. Introduction of four new products during the festival season helped us to grow our volumes during what was a rather sluggish period for the entire auto industry. While we bucked the trend to a large extent, we have also felt the effects of a few adverse external economic factors, during the last few months,” he added.

The luxury car segment was also under pressure. “2018 has been a challenging year for the overall automotive industry and luxury segment in particular. After witnessing a healthy H1, we however faced strong macro-economic headwinds in H2 resulting in a muted festive season; compared to the very strong Q3 2017,” said Martin Schwenk, MD and CEO Mercedes-Benz India.

“However, with a strong product line and launches across segments, supported with India's largest network in the luxury car segment, we expect to steadily continue our lead in the luxury segment and contribute to its growth,” he added.

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Printable version | Aug 19, 2022 12:15:55 pm |