Auto sales in India rose for the second straight month, suggesting that a recovery may have begun to take hold in the sector after a two-year slump. After declining for nine months, demand started picking up in June as lower excise duties and new product launches helped spur demand, says Ventura.
Auto sales in India rose for the second straight month, suggesting that a recovery may have begun to take hold in the sector after a two-year slump. After declining for nine months, demand started picking up in June as lower excise duties and new product launches helped spur demand. The interim budget in February had lowered the excise duty on small cars, scooters, motorcycles and commercial vehicles to 8% from 12%. This was later extended by the National Democratic Alliance government in June.
As consumer sentiments continued to remain positive, major car makers posted a growth in domestic sales in July. In two wheelers segment, Hero Motocorp and TVS witnessed growth in volume. Though Bajaj Auto is still struggling to increase volume in domestic market due to slowdown in premium segment bike, strong growth (54% jump YoY) was witnessed in export sales. Three wheeler sales continue to perform well on the back of issuance of new permits for auto-rickshaws in many states like Maharashtra and UP. In the commercial vehicle segment MHCV and LCV sales continued to show weakness due to increasing diesel price and slow down in industrial activities
Outlook
Despite an encouraging month we believe that the continuing fuel price hikes and the threat of drought led inflation could see a stretched recovery period. However the flurry of car launches over the next couple of months and extension of the reduced excise duties (at least till the end of this calendar year) are expected to help negate the negative environment.
On the commercial vehicle (CV) fronts, the street is confident of a pickup in demand. Although the demand for CVs in the first two months is down by 26.3% YoY, there are expectations that the sales will pick up in the second half of FY15 as the mining and construction activities pick up.
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