auto makers saw a dip in sales in June-Rivals eat into Tata Motors, Maruti's sales in June

Rivals eat into Tata Motors, Maruti's sales in June

Costlier loans, increased fuel prices and high inflation continue to deter buyers from queuing up for new cars, and the incumbents -- Tata Motors and Maruti Suzuki are feeling the heat. The two of India’s largest auto makers saw a dip in sales in June, even as new launches drove sales growth for Toyota and Ford.

Maruti Suzuki, India’s largest passenger car maker, sold around 20,000 vehicles less than what it did in May, a drop of about 23%. Year-on-year sales fell 8.8% in June. This was more to do with the workers strike at its plant in Manesar, which hurt production of its SX4 and Swift D’zire sedans for 10.5 days. The company also took its planned maintenance shutdown at its Gurgaon plant for six days during the month.

However, competition too is catching up on the market leader with recent launches by Toyota (Etios sedan and Liva hatchback), Ford (Figo), Nissan (Micra) among others putting pressure on sales of its vehicles.  Toyota Kirloskar Motors’ sales surged 94% y-o-y in June, with 5,002 units of the Etios sedan sold, and over 1,400 bookings already for the Liva hatchback launched earlier this week. Ford India’s sales rose over 8%, with the company delivering its 100,000th Figo since it was launched last year.

Maruti has also been hit on the exports front for several quarters now after European countries ended the scrappage incentive scheme. The scheme offered incentives for buyers to dump their old polluting vehicles for new fuel efficient ones, benefiting companies like Maruti Suzuki. But things have shifted into reverse gear post that. Its exports slumped 23.7% year-on-year in the April-June period.

Tata Motors too has failed to generate much interest among car buyers, despite a new advertising campaign and new launches like the Aria crossover, Indigo Manza sedan, and hatchback Indica eV2. A new advertisement, for instance, suggests that the Japanese are impressed by its Indigo Manza sedan. But on the ground even Indians seem to have turned their back on the product. Manza sales crashed 35% y-o-y and Indica sales fell 9% in June.

Analysts say the Etios Liva could have some impact on sales of Maruti’s Swift and Hyundai’s i10 and i20 in the near-term, although Maruti will continue its market leadership. But competition is set to rise further with Honda Brio and Chevrolet Beat diesel to be launched later this year. Maruti is launching a new Swift in the second half of this fiscal, which will be a key driver for its sales going ahead.

"The Swift will be a key to shield Maruti’s market share," brokerage Sharekhan said in a recent report. The greatest impact (of new launches), however, will be on marginal products like Tata Indica petrol version and General Motors’ Beat, it said.

Sharekhan has a "hold" on Maruti Suzuki, while Edelweiss Capital has urged investors to "reduce" Maruti shares as it expects recent and upcoming new launches will keep its margins and sales performance under pressure.

Analysts are not very bullish on Tata Motors’ domestic business, but expect its luxury Jaguar and Land Rover unit in the UK will drive consolidated growth. Ambit Capital, for instance, says Tata Motors faces "challenges on the domestic front," but "volume outlook remains strong" at Jaguar Land Rover "driven by continued strong demand from China and other emerging markets, and the expected launch of Range Rover Evoque in September."

Maruti shares Friday closed down 1.4% at Rs 1,143.15, while Tata Motors ended up 0.1% at Rs 994.70.