The automobile industry has ended the financial year on a poor note, as March proved to be another brutal month for sales. Sales of bikes, cars and commercial vehicles contracted sharply in the last three months. The sharp deceleration in sales has come as a shocker to the industry and the Street. So far, projections have been cut four times this fiscal. At the start of the financial year, the Society of Indian Automobile Manufacturers had projected a growth of 13 per cent for the industry but most players have ended FY13 with a contraction in sales. FY14 is not expected to see much of a recovery either.

Till January this year, it was perceived that the slowdown was mostly affecting the medium and heavy commercial vehicles (MHCV) segment and that the passenger segment, especially of diesel vehicles, was holding up well. This myth too, has been busted now, as over the last three months, sales of compact car have contracted sharply. The two-wheeler industry too, is losing steam after having had a very strong run over the last few years.

Other than Maruti Suzuki, Honda Motorcycle and Scooter India and Mahindra & Mahindra, almost every other automaker has ended the year with a contraction in sales. Bajaj Auto has seen its full-year volumes decline two per cent, Hero MotoCorp 2.6 per cent and TVS eight per cent. Other than Honda, two-wheeler sales have declined across companies as have sales of scooters. Tata Motors has been hit hardest. Its passenger vehicle sales are down 71 per cent in FY13, while sales of utility vehicles fell 49 per cent and MHCVs declined 30.7 per cent.

Maruti is facing difficulty in selling diesel compact cars like the Swift. Though it ended the year with sales growth of 4.4 per cent, contraction in exports has weighed. In this environment of gloom, M&M is an outlier. Its passenger vehicle sales have beaten market estimates and grown by 27 per cent in FY13 even though sales of tractors declined 4.6 per cent. Elara Capital expects M&M's utility vehicle sales to moderate sharply to low double digits at best in FY14.

As economic uncertainty continues to loom, nobody's predicting any recovery yet. Analysts are likely to remain cautious in the near term as rising competition is hurting the big boys in the two-wheeler space and rising ownership costs even for diesel vehicles is hurting the passenger vehicle segment, too. Religare Institutional Research has a cautious outlook on volumes in the near-term as any recovery would be very gradual.