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Auto sales growth slows down in November over sluggish demand

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Core Tip:After a strong double digit growth of 14 per cent in October, the Indian automobile industry slowed down to post a moderate 3.18 per cent growth of 1.65 million vehicles in November due to a correction in market demand, Diwali holidays and production loss
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After a strong double digit growth of 14 per cent in October, the Indian automobile industry slowed down to post a moderate 3.18 per cent growth of 1.65 million vehicles in November due to a correction in market demand, Diwali holidays and production loss owing to Chennai floods.

Car and two-wheeler sales got a boost during Diwali and Dhanteras when people took advantage of the sops on offer to book their vehicles, said industry experts. Within the passenger vehicles space, car sales grew 10.3 per cent at 1.73 lakh units, while utility vehicles posted an impressive 20 per cent growth, driven by new models such as Hyundai Creta and Mahindra TUV 300.

Abdul Majeed, Partner at Price Waterhouse, said the growth is not broad based. Some segments such as commercial vehicles are growing on the back of a potential uptick in the overall economic activity while other segments such as passenger vehicles are growing due to lower interest rates and fuel prices.

"For a sustained growth in the Indian automotive industry, it is absolutely necessary to have a robust growth in the overall economy, which, in turn, depends on the next level of reforms, including introduction of Goods and Services Tax ( GST)," said Majeed.

The sales numbers announced by the automotive industry body, Society of Indian Automobile Manufacturers, are of despatch numbers from factory to dealerships, which are different from direct sales to consumers.

As for the two-wheeler segment, the motorcycle sales grew 1.58 per cent to 8.86 lakh units, whereas scooter sales grew just 2.45 per cent at 3.95 lakh units, much below the 5.25 lakh units seen in October, clearly indicating an inventory correction. The overall commercial vehicle sales grew 8.56 per cent at 51,766 units. According to Gaurav Vangaal, senior analyst at IHS Automotive, the cumulative April to November production and sales analysis indicates a very low inventory in December.

"One can expect decent production and sales numbers in the current month, helping the industry carry on the positive momentum. The only area of concern could be the proper resumption of production in Chennai," he said
 

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