Passenger Vehicle Segment in India May Miss FY19 Growth Expectations

The country's passenger vehicle (PV) segment might miss growth expectations of 7-9 per cent in FY19 as tight liquidity conditions and high-interest cost continues to dent consumer sentiments, said a note by brokerage house Centrum Research. In a research note on January automobile sales -- 2019 Starts in the Slow Lane -- the brokerage house cited that higher inventory levels, low consumer sentiment, tough market conditions and tight liquidity dampened sales in the domestic auto market during January 2019.

"Elections and low consumer market sentiment could continue to keep growth in PVs under check in the coming months as well," the note issued on February 4 said. "Considering subdued sentiment, the PV segment looks to miss growth expectations of 7 per cent - 9 per cent in FY19."

According to the brokerage house, Maruti Suzuki once again posted subdued sales, just 0.2 per cent, in the domestic market in Jan'19. Hyundai's sales, too, were muted at 0.6 per cent and M&M showed marginal growth of 0.8 per cent. Tata Motors disappointed, posting a double-digit decline of 11.1 per cent in the domestic PV market.

In terms of commercial vehicles (CV), the note said low consumer sentiment and new axle norms have hit medium and heavy commercial vehicle (M&HCV) sales, in turn overall CV sales.

"Tata Motors posted a decline of 5.8 per cent whereas Ashok Leyland reported a good growth of 9.1 per cent, which was a positive surprise. Eicher Motors also posted a decline of 13.2 per cent. The surprise from Ashok Leyland may have come from stock adjustment at dealership levels," the note read.

"We expect pain for CVs to continue in the coming months." On two-wheelers, the brokerage house said: "We continue to maintain our 9% (approx.)volume growth estimate in the domestic market, despite disappointment in Jan'19."

"This is primarily due to the government's strong focus on the rural economy as highlighted in the recent budget." The note highlighted that Bajaj Auto is safely placed with 40 per cent sales exposure to export markets.