The passenger vehicles (PVs) sales are expected to face further pressure in the current month due to OEMs bid to maintain normal inventory levels amid weak retail sentiments, rating agency Crisil Research said on Thursday.
Continuing to face rough weather, Maruti Suzuki, Hyundai and three other auto majors reported a double-digit decline in sales in July as consumer sentiment remained subdued.
The passenger vehicle volumes are estimated to have declined by around 27-31 percent in July as compared to last year, commented Hetal Gandhi, director, Crisil Research on July auto sales.
The estimated drop in volumes is based on the sales performance of players like Maruti, M&M & Hyundai (having an around 75-77 percent market share in terms of volume) during the months, as per Crisil Research.
The significant decline is observed as the OEMs have undertaken production cuts to rationalize inventory at normal levels, she said.
Automobile manufacturers in the country slashed production by 11 percent in April-June period this fiscal over the year-ago period due to falling sales, it said.
The report also said that the OEMs continued to undertake production cuts in July as well.
"Currently, the inventory days are estimated to have returned to a normal level of 30-35 days due to which Crisil Research expects August sales to face pressure due to OEM efforts to maintain normal inventory levels amid weak retail sentiments, Gandhi said.
The production cut in the PV segment was as higher as 15 percent y-o-y while in the utility vehicles (UVs) segment it stood at 2 percent y-o-y, as per the July 31 report.
According to the Crisil Research report, wholesale off-take of goods carrying the commercial vehicle in July is estimated to have fallen by over 20 percent on-year.
Medium & heavy commercial vehicle demand fell due to an oversupply of freight-carrying capacity created after axle norm amidst weak freight demand and low finance availability due to NBFC liquidity crunch.
"Demand for light commercial vehicles fell, albeit at a lesser pace, due to tepid rural demand and weak finance availability, together with lowering demand especially from market load operators," said Gandhi.
The two-wheeler industry has witnessed six consecutive months of declining sales owing to muted sentiments because of the rising cost of ownership, the slowdown in rural sales and liquidity crunch, she said adding in July, players like Bajaj and TVS recorded a 13 per cent and 15 per cent decline in domestic sales respectively.
The decline in volumes signals a focus on inventory correction as stocks remained high at 50-55 days in June and dealers were concentrating on inventory liquidation, as per Crisil Research."We expect August sales to remain in the red but more favourable than the previous month's volumes, as players are expected to launch new BSVI compliant models ahead of the festival season in September which might augur better wholesale volumes," she added.