Workers assemble a car at the Tata Motors factory in Pune in the Indian state of Maharashtra. Photo: AFP

A slowing economy and uncertainty surrounding the national election saw sales of Indian passenger vehicles skid to an eight-year low in April. According to the Society of Indian Automobile Manufacturers, passenger-vehicle sales declined 17% year on year in April, as dealers did not buy more stock because of poor demand and an inventory pile-up from previous months.

As for vehicle buyers, the main hurdles were tight liquidity in banks and high insurance costs.

And as the country is going through a long-drawn general election, many customers have put off discretionary purchases to await the poll outcome and policies of the new government.

This subdued sentiment is prevalent in both urban and rural areas.

April was the 10th consecutive month during which sales of passenger vehicles remained subdued because of high inventories. The last time passenger-vehicle sales dipped significantly was in October 2011, when they dropped nearly 20%.

According to the Society’s data, car sales declined 15.4% in April and 14 of the 15 carmakers monitored reported a decline in domestic sales.

Maruti Suzuki and Hyundai sales volumes plunged 19% and 10% respectively in April. Maruti had earlier announced a 10% cut in production in April and had slashed production in February and March too.

Also read: India’s Maruti cuts output amid weak demand

For the first time in at least 10 years, all the auto segments, including two-wheelers and commercial vehicles, were in the red.

Demand for two-wheelers was also lackluster in April for the sixth consecutive month, falling nearly 16.4% from the same month last year, dragged down by steep sales drops reported by companies such as Hero MotoCorp and Honda Motorcycles. The demand for scooters plunged 26%, while for motorcycles it was down nearly 12%.

The economic slowdown coupled with revised axle-load standards has hit sales of commercial vehicles, which fell 6% to 68,680 units. According to the manufacturers’ data, the sale of medium and heavy commercial vehicles dropped 13.6% in April, while sales of light commercial vehicles slid 1.1%.

The government last year hiked the loading limit for commercial vehicles, which gave fleet operators more bandwidth to load goods but led to new purchases being postponed.

The slowdown in several infrastructure projects has also affected the demand for commercial vehicles.

Industry observers believe that discretionary purchase of personal vehicles may pick up once the new government is formed after the general election, but the overall sluggish consumption is expected to continue.

Factory output hit

In a related development, India’s factory output entered negative territory in March, contracting 0.1% to signal a slowdown in consumption, as well as investment.

Data released by the Central Statistics Office showed that in March the manufacturing sector contracted 0.4% in March, while mining and electricity grew 0.8% and 2.2%.

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