Domestic passenger cars' sales continued to decline in May, the segment's off-take fell 26.03%. According to industry observers, high base effect, along with low demand and high interest cost continued to dent purchases.
According to the Society of Indian Automobile Manufacturers (SIAM), passenger cars sales in the domestic market dropped to 147,546 units from 199,479 units sold during May 2018.
Among the other sub-segments of passenger vehicles, the number of utility vehicles sold in India went down by 5.64% to 77,453 units in May 2019, while 14,348 vans were sold last month, down 27.07% from 2018.
Overall, passenger vehicle sales declined 20.55% in May to 239,347 units from 301,238 units.
According to experts, subdued consumer sentiment and the recently concluded general election had a major part in sales slowdown.
Commenting on the sales performance, Rajan Wadhera, President, Automotive Sector, M&M had said: "While consumer sentiment and demand continued to be subdued during the pre-election phase, our focus has been on correcting the channel inventory."
"Now, with a stable government at the centre and the forecast of a near normal monsoon, we hope to see an improvement in consumer sentiment over the next few months.”
In April as well, passenger car sales in India declined 19.93% as low demand along with high interest cost continued to dent purchases.
According to the SIAM, passenger cars sales in the domestic market dropped to 160,279 units from 200,183 units sold during April 2018.
Overall, passenger vehicle sales declined 17.07% in April to 247,541 units, from 298,504 units in the same month last year.
As per the data, total sales of the Indian automobile sector declined by 15.93% during April 2019 to 2,001,096 units across segments and categories.
Meanwhile, auto and home loans are set to become cheaper as the Reserve Bank of India (RBI) went for a hat-trick of rate cuts last week by lowering key lending rate for commercial banks by 25 basis points (bps) to 5.75%, the lowest in the past nine years. This was the third reduction in repo rate in 2019.
With auto loans expected to become cheaper, there is hope for consumer sentiment to pick up in the automobile sector.
At present, high interest rates and liquidity constraints have demoralised auto, home and capital goods buyers. Accordingly, a lower repo, or short-term lending rate for commercial banks, will reduce interest cost on automobile and home loans, thereby ushering in growth.