Moneycontrol Bureau
Improving consumer sentiment, coupled with a pick-up in economic growth and lower fuel prices will propel auto sales in 2015-16, says rating agency CRISIL. It expects strong domestic automobile sales volume despite the recent increase in excise duties.
Domestic sales volumes of medium & heavy commercial vehicles (MHCVs), which nearly halved over the previous 2 years, recovered slightly in 2014-15 over a low base. By contrast, light commercial vehicle (LCV) sales continue to stumble, reflecting weakness in consumption expenditure, and a challenging financing environment.
However, in 2015-16, CRISIL expects overall commercial vehicle (CV) sales to grow by 11-13 percent, led by continued recovery in MHCV sales, which are projected to rise by 16-18 percent mainly on the back of a pick-up in industrial growth and continued uptick in replacement demand from large fleet operators. Supporting MHCV sales are expectations of fleet utilisation levels approaching normal levels in the second half of 2015-16, the report says.
According to CRISIL, LCV sales are expected to recover in 2015-16, increasing by 7-10 percent, owing to rising consumption expenditure, improvement in the financing scenario and new model launches.
Cars & utility vehicle (UV) sales, which declined by 6 percent in 2013-14, recovered by a marginal 3.7 percent Y-o-Y in the first 9 months of 2014-15. Lower vehicle prices following excise duty cuts in the 2014-15 Budget and decrease in fuel costs improved affordability, thus stimulating demand. Although consumer sentiment has improved since the middle of 2014, it is yet to translate into a significant rise in vehicle purchases.
According to CRISIL, in 2015-16, cars & UV sales are forecast to register stronger growth of 9-11 percent, driven by revival in economic growth and low inflation levels translating into a steady rise in disposable incomes.
“Reduction in interest rates and low fuel costs will bring down the cost of ownership marginally, thereby boosting demand. Players are also expected to continue launching new models across segments during the year, which will support sales,” the report says.
CRISIL also sees two-wheeler sales edging higher. Two-wheeler sales rose by 12 percent Y-o-Y from April-December 2014 (YTD), with 30 percent YTD rise in scooter sales being the primary driver of overall growth. CRISIL expects the growth momentum to continue in 2015-16, with sales clocking 12-14 percent owing to higher farm incomes and continuing consumer preference for scooters.
Demand from the rural market, which accounts for nearly 45 percent of domestic motorcycles demand, was affected in 2014-15 as a below-par monsoon impacted farm output and incomes. CRISIL expects sales volumes to recover in 2015-16, growing by 8-10 percent; the forecast assumes a good rabi crop and timely, adequate and well-distributed rainfall in 2015.
Scooter sales, on the other hand, have been growing at breakneck speed due to improved road network in semi-urban and rural cities, its gender neutral positioning and perception as a family utility vehicle. According to CRISIL, in 2015-16, scooter sales volumes are projected to continue to post 20 percent-plus growth.
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