Strong monsoon helps cushion Mahindra’s September auto sales decline

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September Auto Sales 2019

Mahindra & Mahindra, one of India’s biggest home-grown automakers, reported continued pain in its passenger vehicle department, but sales decline a its commercial vehicle and tractor divisions seemed to show signs of moderation in September.

Domestic sales of passenger vehicles were down 33% in September, doing worse than August, when they had declined 32%. The company sold 14,333 PVs during September 2019, compared to 19,995 a year ago and 13,507 in the previous month.

August Auto Sales, 2019

Utility vehicles, which make up over 90% of the passenger sales volumes, saw their sales fall 30% in September, compared to a decline of 27% in August. Part of the reason may be the launch of XL6, a mid-range SUV from India’s biggest carmaker Maruti Suzuki in August.

CV AND FARM

Despite the pain in passenger vehicles, the other two units — commercial vehicles and tractors — posted slight improvements in September compared to August.

CV sales declined only 18% in September compared to 28% in August, while tractor sales were flat in September, compared to a decline of 15% in August.

Moreover, September is a more important month for farm equipment sales as many farmers defer the purchase of tractors to this month.

As such, M&M sold 36,046 tractors in September compared to just 13,871 in August.

Some tempering was seen various sub-segment of commercial vehicles, except in the medium-light category (3.5 tons and higher).

Light CVs with less than 3.5 tons of carrying capacity witnessed a sales decline of ‘only’ 15% in September compared to a decline of 25% in August.

Medium and Heavy CVs, or trucks, saw a decline of ‘only’ 62% versus the 69% fall seen in August.

However, light-medium vehicles saw a decline of 26% versus 20% seen in August.

Three-wheeler sales were the only ones that showed an actual increase in numbers, up 8% at 7,487, versus a growth of just 2% in August.

MONSOON EFFECT?

Part of the reason for the decent numbers from the CV and farm equipment divisions could be the robust monsoon season, contrary to widespread worries of low rainfall this year caused by poor precipitation in June and July.

Rainfall patterns have shown a change this year, with more rains falling in the second half of the monsoon season (August-September) than in the first half.

The monsoon factor would also explain why passenger vehicle numbers continued to remain depressed, while the other two segments have started showing improvements.

Veejay Ram Nakra, head of auto sales for M&M, said he was hopeful that the numbers indicated the beginnings of a turnaround for the auto industry.

“We are positive that this festive season, with the onset of Navratra, will augur well for us and the automotive industry. This, in addition to factors such as the good monsoon and recently announced positive government initiatives should help revive the industry in the short term,” he said.

CONCERNS

Despite the decent numbers posted by non-PV units, the performance of M&M’s passenger vehicle division will continue to cause some concern among investors given that competitor and bellwether Maruti Suzuki showed a distinct improvement in its sales trends in September.

The decline in Maruti Suzuki’s PV sales in India moderated to 26.7% in September from an eye-watering 35.9% in August.

The company sold 1.10 lakh PVs to end-users in India during September, compared to 0.93 lakh in August.

However, out of the 17,000 or so increase in sales, around 10,000 came in the mini segment, which is the least profitable for Maruti Suzuki. The remaining increase was almost equally split between the bread-and-butter compact segment — including the likes of Swift and Dzire — and the UV segment, whose increasing contribution to Maruti Suzuki’s overall pie is giving sleepless nights to M&M investors.

Maruti Suzuki launched XL6, a mid-tier SUV costing around Rs 10 lakhs, in August, which is expected to have accounted for much, if not all, of the jump of 3,000 seen in UV sales in September compared to August.

Maruti Suzuki September 2019 Auto Sales
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