Demand slump continues in April: What falling car, two-wheeler sales figures tell us about state of Indian economy

Automakers, including the market leaders, aren’t having a good time in India. In April too, India’s top carmakers have seen degrowth in their sales . April can be blamed for being a typical dull month but when the degrowth is sustaining for good ten months, we know there is a real problem on the demand front. Maruti Suzuki India (MSI) and Hyundai Motor India too, had also reported a decline in their domestic sales in April. MSI reported 18.7 percent fall while Hyundai posted a decline of 10.1 percent during this period. That’s not all. [caption id=“attachment_5491431” align=“alignleft” width=“380”] Representational image. Reuters[/caption] Most other competitors too have witnessed a consistent degrowth in their sales numbers too. Tata Motors’ passenger vehicle sales in the domestic market declined by 26 percent to 12,694 units last month, compared with 17,235 units during the corresponding period the previous year. Mahindra & Mahindra (M&M) saw its passenger vehicle sales drop 8.94 percent to 19,966 units in April as against 21,927 units in the year-ago period. Toyota Kirloskar Motor said its domestic sales last month stood at 10,112 units against 13,037 units during the same period in 2018, a decline of 22.43 percent. What is happening on two-wheeler sales? The story is not very different here as well. In April, the two-wheeler sales in the country fell as unsold inventories are piling up in factories despite companies cutting down production. Cumulative sales of the top six two-wheeler manufacturers declined to nearly 1.58 million units last month, from 1.88 million units during the same period a year ago. Market leader, Hero MotoCorp on Thursday said it sold 574,366 units in April, registering a decline of 17.24 percent as it sold 694,022 units during the same month last year. Let’s look at the tractor sales which will give a sense about how the farm economy is doing. Here too, the sales have dropped. Farm equipment major Escorts Ltd reported 14.9 percent decline in its total tractor sales at 5,264 units in April 2019 compared with 6,186 tractors in the same month last year. Now, what does this tell us? Some of it can be blamed on the seasonal factors and some on the slow sales during the elections. But, the larger trend is hard to ignore. Demand scenario in urban, semi-urban and rural areas is bad and at a broader level, this shows the persisting weakness in the economy. While car sales largely indicate the demand scenario in urban segments, two-wheeler sales reflect both urban and semi-urban demand and tractor sales the rural India demand scenario. The takeaway from these figures is simple. Lower sales means either people are postponing their buying decisions anticipating difficulties ahead or in other words, consumer confidence remains low, contrary to what the Reserve Bank of India (RBI) surveys indicated in March. This low consumer confidence will have cascading effect on the economy. Slowing business will lead to lower tax revenues and employment opportunities. In fact, the economy is already witnessing such a scenario. (Data contribution by Kishor Kadam)