Consumer demand positive, supply side constraints pose challenge, Auto News, ET Auto

New Delhi: The Indian automotive industry, it appears, is gradually getting out of the COVID-induced lockdown challenges. Except for Maruti Suzuki, all other major OEMs have reported positive sales growth in August 2021 compared to the same last year. In anticipation of the festive season, dealers are getting robust enquiries and order bookings across segments. The consumer sentiment is positive and demand for new vehicles strong.

However, the vehicle demand-supply balance is unequal. The long standing semiconductor or chip shortage is hampering production schedules. From July to August, many OEMs have reported a decline in sales on a sequential basis.

A Bloomberg report states that electronic parts and components account for 40% of the cost of a new internal combustion engine (ICE) car, up from 18% in 2000.

While the semiconductor shortage continues to impact the auto industry globally, the recent lockdowns in East Asia have worsened the supply situation.

On Tuesday, Maruti Suzuki India Ltd (MSIL) reported that because of the shortage in semiconductors it is expecting a fall in total production volumes at its manufacturing plants in Haryana and Gujarat in September. It is estimated that the total vehicle production volume across both the locations could be around 40% of normal production.

“Tata Motors is forced to moderate production and off-take volumes in the coming months. The situation is fluid and we will continue to work to mitigate the impact of this and aim to meet our customer orders through an agile, multi-pronged approach including close engagement with our extended supply chain partners, procuring chipsets from the open market, using alternative chips and managing our model and trim- mix,” the company said.

Veejay Nakra, Chief Executive Officer, Automotive Division, M&M Ltd, also agreed that the supply of semiconductors continues to be a global issue for the auto industry.

According to Rakesh Sidana, director-sales, MG Motor India, even though the company is witnessing busy dealerships which are eagerly seeking more inventory, the severe shortage of chips is expected to continue till the end of the year, leading to production constraints. The company said it recorded the highest-ever bookings of ZS EV last month at over 700 units. However, it expects manufacturing in September to be lower than August.

Nissan Motor India which sells models across its two brands, Nissan and Datsun, also said that the customer sentiments are positive with the start of the festive season but the challenge is on the supply side with shortages and increased lead time of semiconductor supply.

Rakesh Srivastava, Managing Director, Nissan Motor India, said that the company foresees this challenge to continue during the coming months.

The following is a segment-wise analysis of vehicle sales in August 2021.

Passenger vehicles

Domestic sales remained in the green in August across the PV segment, except for the market leader MSIL, which was severely marred by chip shortage.

Maruti Suzuki witnessed a growth of 5% in its total sales (domestic + exports) at 130,699 units in August 2021 as against 124,624 units in August last year. But its domestic sales was 9% down to 103,187 compared to 113,033 units in the same month in 2020.

“While the sales volume in August 2021 was affected by the electronic components shortage, the sales volume in August 2020 was impacted by the COVID 19-related disruptions,” the carmaker said in a regulatory filing.

The mini passenger vehicles Alto and S-Presso clocked 20,461 unit sales in August 2021, compared to 19,709 units in August 2020. Compact passenger vehicles including WagonR, Swift, Celerio, Ignis, Baleno, Dzire, and Tour S logged 45,577 units in the month under review, against 61,956 units in August last year.

MSIL also raised prices across its range of vehicles starting September, to offset the increase in input costs.

Car sales in August

( The auto companies in India report their dispatch to dealers as their monthly wholesale figures.)

Tata Motors, which is leading the change to electric vehicles in the Indian market, said its EV sales crossed over 1000 units in August.

Kia India which dispatched 7,752 units of Sonet, 8,619 units of Seltos, and 379 units of Carnival last month to its dealers highlighted that August gave healthy sales numbers.

“With the festive season around the corner, we are anticipating a further rise in this number. To cater to the pent-up and upcoming demand of our vehicles, we are taking appropriate measures to enhance production,” Tae-Jin Park, chief sales and business strategy officer, Kia India, said in a statement.

V Wiseline Sigamani, associate general manager(AGM), sales and strategic marketing, Toyota Kirloskar Motor, said, “We are witnessing a steady growth after the second wave and the trend continued in August as well. Customer orders are healthy, and the retail sales have shown an improvement compared to last month.”

The company which sells models like Innova Crysta and Fortuner said it expects the positive demand trend to continue due to the resumption of economic activity, uptick in personal mobility and overall improvement in market sentiment.

Two-wheelers

The segment has been recovering on a slow pace post the second wave. On a year-on-year basis, domestic sales of motorcycles and scooters were in red in August.

Rohan Kanwar Gupta, Vice President & Sector Head – Corporate Ratings, ICRA said , “The performance reflects some impact of semiconductor chip shortages on the production of high end (>150cc) 2Ws. In contrast, the retail 2W registration data shows a 14% sequential decline in Aug 2021 (and on YoY basis around 7% higher). The data indicates that high fuel inflation and escalating cost of ownership (due to commodity price pressures) continue to impact sentiments.”

India’s largest two wheeler maker Hero MotoCorp said it is gearing up for the upcoming festive season, and remains optimistic about demand in the coming months with several positive indicators, such as the decent monsoon resulting in encouraging farm activity in most parts of the country, and the several government schemes in the social sector.

“Also, with Covid- 19 vaccination gaining pace and last-mile retail opening up further, the numbers are expected to be positive in the coming months,” it said.

According to Yadvinder Singh Guleria, Director for sales and marketing, Honda Motorcycle & Scooter India (HMSI), “August ushers in the festival spirit in the country. With a steady month-on-month recovery in terms of enquiries and customer walk-ins, we are cautiously optimistic moving forward, expecting conversions to retails.”

2W sales in August

“While a possibility of third wave and delta variants continue to remain a risk to steady offtake, a decent monsoon, upcoming festive season and healthy pace of vaccination are expected to support sentiments (and volume recovery) in the forthcoming months.” ICRA said.

TVS Motor said its production and sales of premium two-wheelers were severely affected due to the semiconductor shortage. However, with the pandemic restrictions easing and the festive season soon approaching, the company said it expects the retails to improve significantly in the coming months.

“The demand in the export market continues to be robust, and container availability is improving. We are optimistic of further improvement in container availability in the coming months,” TVS added.

Commercial Vehicles

Except Mahindra & Mahindra, the CV segment remained in the green on a low base recovery of the last year. The company witnessed a positive year-on-year growth in three-wheelers and medium & heavy commercial vehicles (MHCVs). However the light commercial vehicles (LCVs) remained in the negative.

CV sales in August

VE Commercial Vehicles (VECV) , a joint venture between Volvo Group and Eicher Motors, said in the domestic market, Eicher brand of CVs clocked sales of 3,864 units as against 2,190 units in the year-ago month, up 76.4%. Exports of Eicher branded trucks and buses stood at 803 units last month as compared to 250 in August 2020.

Volvo trucks and Volvo buses recorded sales of 126 units in August 2021 as against 37 units in the corresponding month last year, the company said.

Tractors

According to Hemant Sikka, president – farm equipment sector, Mahindra & Mahindra Ltd, the industry saw a de-growth in August over last year due to high base effect. “We saw smart recovery in overall acreage of Kharif crops with most of the key crops posting acreage levels closer to last year’s sown area, despite erratic monsoon in select markets. With the festive period on the anvil, which also coincides with the harvesting season, we are anticipating robust demand in the coming months.”

Tractor sales in August

Entering the festive season months, Escorts also sees farmer sentiment strong and enquiry level building up, driven by favourable macroeconomic factors, reasonably good water level in reservoirs, good pace of Kharif sowing and continued support by the government to the agriculture sector.

“Some parts of the country have faced a deficit of rainfall in July and August, and it remains to be seen how the monsoon behaves in September. Inflation continues at unprecedented levels,” the company added.

(This is a developing story. We will keep updating as the OEMs release their sales data.)

“in all four segments of the industry — passenger vehicle, two-wheelers, commercial vehicle, and three-wheelers, the long-term growth rate has come down drastically in the past 5 to 10 years even before COVID started,” SIAM President Kenichi Ayukawa said.