Auto exports grow many folds in Q1; will it sustain the momentum?, Auto News, ET Auto

New Delhi: The Indian automobile OEMs are on a slow recovery path in their domestic sales. But their exports increased manifold during the April-June 2021 quarter owing to low base of the last year, the lower impact of COVID on India’s major export markets like Africa and Latin America, and better overseas shipments with improved pandemic situation in other international markets.

According to the Society of Indian Automobile Manufacturers (SIAM), India’s total automobile exports for the April-June 2021 quarter were at 14,19,430 units as compared to 4,36,500 units in April-June 2020.

During the first quarter of FY21 (April-June 2020), the auto industry faced hiccups due to the global pandemic as well as weakened crude oil prices which hit the economies of the key exporting destinations for India. The nationwide lockdown and the supply-chain and logistics disruptions also impacted exports badly.

In May 2020 particularly, automobile sector exports dropped 73% to USD 230.3 million and auto exports to the US nosedived 98% to USD 1.37 million. Shipments to Mexico, which is another important market for Indian automobiles, dropped more than 65% to USD 42.50 million during the month.

However, during April-June 2021, the COVID waves were not simultaneous across countries. While India was under lockdown with the second wave, many of the global companies were opening up and the production that was lying with the Indian OEMs was diverted to the export markets.

Export is going to be an additional revenue generator in the two-wheeler segment, however for certain OEMs it will continue to be a primary revenue generator in four-wheelersKaushik Madhavan, Frost & Sullivan

Passenger vehicles

In the April- June 2021 quarter, the Indian carmakers exported 1,27,115 vehicles, more than double of the 43,619 units exported in the same quarter last year.

According to Kaushik Madhavan, vice president-mobility, Frost & Sullivan, export is going to be an additional revenue generator in the two-wheeler segment, however for certain OEMs it will continue to be a primary revenue generator in four-wheelers.

He said, “This is true for a lot of companies which are looking at export- oriented production in India, like Renault, Nissan, Ford or Isuzu. They export more than what they sell domestically. For instance, Isuzu still exports non BS-VI variants to other countries globally. So this is going to continue in order to strike a balance between revenue generated through exports and domestic sales.”

“Exports will play a big role for these OEMs. The spike will not be as big as Q1 but it will be a fairly positive trend for the next 2-3 quarters. I don’t see them coming down anytime soon,” Madhavan said.

Maruti Suzuki India Limited (MSIL), the largest car maker in the country, emerged as the top exporter for Q1 FY22 which shipped 45,056 units. In April 2021, the automaker exported 17,131 units, followed by 11,147 units in May and 16,778 units in June.

The export volumes for the company increased on a sequential basis as well. In January, the carmaker exported 12,345 units, followed by 11,364 units in February and 11,408 units in March, resulting in 35,117 units for Q4 FY21.

MSIL began vehicle exports in fiscal 1986-87, and its first large consignment of 500 cars was to Hungary in September 1987.

As per a report, MSIL currently exports 14 models, nearly 150 variants, to over 100 countries. The carmaker said it has been able to gain a sizable share in markets like Chile, Indonesia, South Africa and Sri Lanka. Models such as Alto, Baleno, Dzire and Swift have emerged as popular choices in these markets.

Hyundai Motor India exported 29,881 cars in the April-June 2021 quarter, led by the compact hatchback and compact UV segments, which saw 12,695 units and 9,979 units of exports respectively in the quarter under review.

Renault recorded the highest growth in exports with 4,489 units in Q1 FY22, up from just 24 units in the first quarter of FY21.

Top 10 PV Exporters

Source: SIAM

Shamsher Dewan, vice president and group head – corporate sector ratings, ICRA Limited, said, “In the backdrop of gradual rollout of the vaccination drive, mobility operations are returning to normalcy in some of the key overseas markets for Indian passenger vehicle OEMS, which is supporting exports volume. Moreover, Indian OEMs are also venturing into new markets which are supporting overall export volume.”

“We expect exports to remain healthy in the coming months as well, though supply chain constraints due to semiconductor and container shortages pose some challenges,” he added.

Two-Wheelers

India’s two-wheeler industry, the biggest in the world, exported 11,37,102 vehicles during April-June 2021, growing more than 3x from the same period last year.

Bajaj Auto, whose strength majorly lies in its exports, was leading the volumes in the first quarter of FY22, with 221,603 units in April, followed by 180,212 units in May and 154,938 units in June 2021.

In a recent media interview, the company said that it will continue to remain aggressive on its exports, which account for 40%-45% of group motorcycle sales for Bajaj Auto. Currently, the automaker sells to countries in Africa, Asia and Latin America. However, it is facing supply chain issues at its plants in India due to lockdowns imposed by local governments.

Suzuki Motorcycle India, which exported 29,826 units during Q1 FY22 reflected the highest growth at 889% as against the corresponding quarter of FY21.

In the motorcycle segment, Bajaj Auto’s 5,56,753 unit exports were way ahead of its peers. Hero MotoCorp exported 80,335 units followed by India Yamaha Motor and HMSI at 55,781 and 43,792 units respectively.

In the scooter segment, exports were led by Honda Motorcycle and Scooter India (HMSI) with 38,602 units in Q1 FY22, followed by TVS and Suzuki at 14,707 and 13,604 units respectively. Hero MotoCorp exported only 3,465 units in Q1 FY22.

Bajaj Auto, the only company to export quadricycles, reported 1,625 units in the segment.

Top 10 2W Exporters

Source: SIAM

According to Shamsher Dewan of ICRA, “Demand for two wheelers in key export markets have remained robust since September 2020, reporting YoY growth. Most markets in Southeast Asia, Africa and LATAM had already recovered to an extent from the adverse impact of the pandemic and quickly reverted to pre-Covid levels of demand. In June 2021, exports saw a 77% YoY growth, though these were flat on a MoM basis. ICRA expects that a steady export demand will continue to support industry volumes in FY22.”

Most markets in Southeast Asia, Africa and LATAM had already recovered to an extent from the adverse impact of the pandemic and quickly reverted to pre-Covid levels of demandShamsher Dewan, ICRA

Outlook

Even though container shortages have eased out over time, fear of the third wave, and chip shortage might pose a challenge. However analysts remain positive about the overall export momentum for the coming months.

Ajay Srinivasan, director, CRISIL Research said, “In major economies across the globe, the vaccination rates have been in excess of 40% and the PMI mfg has seen significant expansion signaling a turnaround in the economy. Also, many places are learning to live with the virus which may also aid exports. There is some resurgence in cases in some parts of EU and the UK which are anyway very small export markets for Indian automobile exports,” he said.

Kaushik Madhavan said, “Regions in the Gulf Cooperation Council (GCC), African and Latin American markets will continue to be priority for exports from Indian OEMs. In fact, quite a few OEMs are looking at dealer partners in these countries to set up an official dealership network there.”

Hetal Gandhi, director, CRISIL, said, “A lot depends on what happens about the third wave but I feel OEMs will use export markets to balance out the sales shortfall in the domestic markets.”

“Overall recovery for global markets is expected to be faster than the domestic market because of the higher cash incentives and direct relief packages being announced in the US and European economies which are larger than India. This will help to maintain their saving levels and drive consumptions which could be the likes of cars, thereby providing some support for India’s export momentum,” she added.

Moody’s Analytics on Monday said that the second wave of the Covid-19 pandemic may do a more lasting damage to the Indian economy and exports will once again be the foundation for recovery.

In India, where exports have only a small share in the economy, high commodity prices have boosted the value of exports. This is one factor that helped reinvigorate India after its first devastating wave of Covid-19, Moody’s Analytics said.

(Anirban Ghosh also contributed to the story)

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