Retail sector of automobile
industry
Done by
Aadhavan Parthipan
About the automobile industry
The Indian auto industry became the 4th largest in the world with sales
increasing 9.5 per cent year-on-year to 4.02 million units (excluding two
wheelers) in 2017. It was the 7th largest manufacturer of commercial
vehicles in 2018.
The Two Wheelers segment dominates the market in terms of volume
owing to a growing middle class and a young population. Moreover, the
growing interest of the companies in exploring the rural markets further
aided the growth of the sector.
India is also a prominent auto exporter and has strong export growth
expectations for the near future. Automobile exports grew 14.5 per
cent during FY 2019. It is expected to grow at a CAGR of 3.05 per cent
during 2016-2026. In addition, several initiatives by the Government of
India and the major automobile players in the Indian market are
expected to make India a leader in the two-wheeler and four wheeler
market in the world by 2020.
Market size
Overall domestic automobiles sales increased at 6.71 per cent CAGR
between FY13-19 with 26.27 million vehicles getting sold in FY19
.Domestic automobile production increased at 6.96 per cent CAGR
between FY13-19 with 30.92 million vehicles manufactured in the country
in FY19
In FY19, year-on-year growth in domestic sales among all the categories
was recorded in commercial vehicles at 17.55 per cent followed by 10.27
per cent year-on-year growth in the sales of three-wheelers.
Premium motorbike sales in India crossed one million units in FY18. During
January-September 2018, BMW registered a growth of 11 per cent year-on-
year in its sales in India at 7,915 units. Mercedes Benz ranked first in sales
satisfaction in the luxury vehicles segment according to J D Power 2018
India sales satisfaction index (luxury).
Sales of electric two-wheelers are estimated to have crossed 55,000
vehicles in 2017-18.
Investments
As per department for Promotion of
Industry and Internal Trade (DPIIT) $21
billion FDI ,FY19
Some of the recent/planned investments and
developments in the automobile sector in India are
as follows:
Ashok Leyland has planned a capital expenditure of Rs 1,000 crore
(US$ 155.20 million) to launch 20-25 new models across various
commercial vehicle categories in 2018-19.
Hyundai is planning to invest US$ 1 billion in India by 2020. SAIC
Motor has also announced to invest US$ 310 million in India.
Mercedes Benz has increased the manufacturing capacity of its
Chakan Plant to 20,000 units per year, highest for any luxury car
manufacturing in India.
As of October 2018, Honda Motors Company is planning to set up
its third factory in India for launching hybrid and electric vehicles
with the cost of Rs 9,200 crore (US$ 1.31 billion), its largest
investment in India so far.
In November 2018, Mahindra Electric Mobility opened its electric
technology manufacturing hub in Bangalore with an investment of
Rs 100 crore (US$ 14.25 million) which will increase its annual
manufacturing capacity to 25,000 units.
Government initiatives
The Government of India encourages foreign investment in the automobile
sector and allows 100 per cent FDI under the automatic route.
Some of the recent initiatives taken by the Government of India are -
The government aims to develop India as a global manufacturing centre and an
R&D hub.
Under NATRiP, the Government of India is planning to set up R&D centres at
a total cost of US$ 388.5 million to enable the industry to be on par with
global standards
The Ministry of Heavy Industries, Government of India has shortlisted 11 cities
in the country for introduction of electric vehicles (EVs) in their public
transport systems under the FAME (Faster Adoption and Manufacturing of
(Hybrid) and Electric Vehicles in India) scheme. The government will also set up
incubation centre for start-ups working in electric vehicles space.
In February 2019, the Government of India approved the FAME-II scheme with
a fund requirement of Rs 10,000 crore (US$ 1.39 billion) for FY20-22.
Retail sector
Indian automotive retail declined 8 per cent YoY in March 2019 to
16,82,656 units, recent data from the Federation of Automobile
Dealers Association (FADA) revealed. The retail sales for March
2018 stood at 18,21,538 units.
FADA releases number based on VAHAN data which covers about
80 per cent of the country's RTO.
As per the report, the retail sales in all the segments are in red for
the month of March. While two-wheeler and three wheeler posted
single digit decline (7% and 6%), commercial vehicle and passenger
vehicle declined 12 per cent and 10 per cent, respectively.
Sales Report of FY18 & FY19
Retail sales March 2019 March 2018 % change
Passenger 2,42,708 2,69,176 -10%
Commercial 61,896 70,203 -12%
Vehicle
Two-wheeler 13,24,823 14,25,356 -7%
Three-wheeler 53,229 56,803 -6%
Total 16,82,656 18,21,538 -8%
News on automobile industry
However, inventories in all auto segments have reduced to
40-50 days, down from 60 days for passenger vehicles and 90
days for two-wheelers.
The inventory reduction came after several OEMs like
Maruti Suzuki and Hero MotoCorp reduced their production
for the month.
Ashish Kale, President, of FADA said, “F.A.D.A appreciates
and applauds the bold steps taken by majority of OEMs for
regulating production to current demand and helping dealers
in reducing inventory.”
According to FADA, sales are expected to stabilize to their
normal range in the next 4-6 weeks.
News on automobile industry
As the stock increases and as payment to banks have to be made on a
due date, how quickly you rotate your funds or how quick your retail
sales are matter. In the absence of retail (sales), the stock goes up, and
therefore, your exposure to the bank also goes up, because you are
carrying a much larger stock
The slowdown beleaguering the auto industry has been a prolonged
one, with passenger car sales plummeting every month during the past
year, with October being the sole exception. In June, four out of the six
main passenger vehicle makers registered a double-digit fall in sales.
Insufficient liquidity, higher rejection rate in financing and overall
[negative] consumer sentiment have cast a shadow on spending.
Like others, Tata Motors is also focussing on pushing its retail sales. SN
Barman, Vice-President, Sales, Marketing and Customer Support, Tata
Motors, said the company has taken a “conscious call” to focus on
pushing retail sales as opposed to sales to wholesalers. The company is
also gradually trying to bring down the dealer stock to its desired level
of 21 days. It is also betting big on the rural market and planning to
increase its reach to drive growth.
