The Auto Expo, to be held in the capital from Wednesday, promises to be as exciting as it always is with manufacturers vying with one another to show off their latest models. It?s a pity though that the macroeconomic environment remains so hostile and that auto manufacturers aren?t able to sell as much they were last year. While Maruti Suzuki reported a 10% year-on-year decline in volumes in January, passenger Utility Vehicles (UV) at Mahindra and Mahindra recorded a sharp drop of 26% yoy. It?s no easier in the two-wheeler space; that both Hero MotoCorp and Bajaj Auto missed operating profit estimates for Q3FY14, the festive and wedding season, is a comment on how weak demand is. The near total lack of pricing power was reflected in the sequential fall in margins for both manufacturers; ironically, Hero?s volumes are at a lifetime high but its margins are at a year?s low. In the past couple of years, car makers like Maruti had found good catchments in rural India but consumption in the hinterland too is beginning to taper off.
Nevertheless, auto players will use the exhibition to showcase their newest creations hoping demand will bounce back. It might be a while, however, before consumers summon the courage to loosen their purse strings. Even if India?s manufacturing PMI expanded to 51.4 in January, up from 50.7 in December?the best reading in many months?there are few signs the economy is coming out of the slump; contracting volumes of commercial vehicles (CV) suggest economic activity remains sluggish. At Tata Motors, CV sales fell a steep 37% yoy in January not surprising given how truck utilisation levels remain low. However, the slight increase in M&HCV volumes, over the December numbers, is an encouraging sign, maybe even a green shoot.
