Maruti car sales up in July despite plant lockout

Car sales continued to increase moderately in July with top three players riding on diesel models to report growth, but lockout at Maruti Suzuki's Manesar plants may hit the market this month.

Market leader Maruti Suzuki increased its domestic sales 7% year-on-year in July on the back of strong demand for its Swift and Dzire cars that have now run out of stock due to non-production at the two Manesar plants that make 40% of all Maruti vehicles. Others such as Hyundai, Tata Motors, Mahindra & Mahindra and Toyota too increased their sales in July, while GM, Ford and Honda reported lower sales.

Hyundai, the country's second-largest carmaker, reported 7.6% gain in July, powered by i20 hatchback and Verna sedan, and the company expects the industry growth rate to remain low.

"The overall market demand is suppressed due to general inflationary trend, high fuel prices and interest rates. Unless any major triggers get activated, market sentiment is not expected to improve very much," Hyundai Motor India Vice-President, National Sales, Rakesh Srivastava said.

Analysts say that a potential indefinite lockout at Maruti's two Manesar plants following massive violence that led to the death of a manager last month will impact the overall car market this month, while benefitting rival carmakers.

"Maruti's loss of production, specially of high-selling cars like Swift and DZire cars, would strongly impact the market," Deepesh Rathore, India MD of consulting firm IHS Global Insight, said. He expects about 40% of Maruti's customers to shift loyalties and buy cars from rivals such as Ford, Volkswagen, Toyota and Nissan.

The company has already informed its dealers on the non-availability of its popular Swift and Dzire cars, but has not stopped bookings. The two models have already clubbed 1.25 lakh bookings across the country.

In July, its DZire sedan sales increased three-fold to 11,413 units, while the compact segment of Swift, Estilo and Ritz grew 73% to 9,099 units. But sales of entry-level M800, Alto and WagonR dropped 24% to 28,998 units as demand for petrol-powered cars continued to slip.

Sales of cars and SUVs at Tata Motors surged 53% in July as India's largest automaker gained from a strong lineup of diesel-fired vehicles, which now drive the demand in the country. M&M too reported 27% jump in passenger vehicle sales, but remains cautious about the market sentiment.

In the two-wheeler market, Honda Motorcycle & Scooter and Suzuki Motorcycle India reported huge gains in sales in July at 57% and 49%, respectively. Market leader Hero MotoCorp, however, reported slight fall in sales.