New Delhi: Consumer sentiments have largely remained muted during the first month of the fiscal year 2023-24. However, improvement in supply side issues and building up channel inventory with BS-VI Phase-II models has ensured good wholesales for April.
According to Motilal Oswal, there has been a decline in retails across different segments. This can be largely attributed to pre-buying (due to OBD-II norms) that took place in the previous month as well as the ongoing weakness in rural areas.
The two wheeler sales declined by 12-14% year-on-year and tractor sales by 10-12%.This may also be attributed to a mismatch in festive demands (Navratri and marriage season was in April 2022). Demand for PVs and MHCV were better off as they declined by a mere 5-7% YoY despite a high base, it said.
Nikunj Sanghi, Founder & Dealer, JS Fourwheel Motors also said that the consumer demand has not been up to the expectations. It remained muted and there has been a reduction in the footfalls.
“The overall sentiment during April was weaker than expected. It was partly because of the unseasonal rains which impacted the two wheeler demand and specifically the grain-belt, thereby impacting the rural demand,” he said.
Shashank Srivastava, Sr. Executive Officer (Marketing & Sales), Maruti Suzuki said, “Rural demand depends on good monsoon and we are trying to anticipate what the effects of El Nino might have on rural demand because irregular monsoon not only has an impact on agricultural income but also on food inflation.”
April also saw several festivities across different parts of the country, including Baisakhi, Bohag Bihu, Bengali New Year, Akshaya Tritiya and Eid.
“The impact of festive demand was observed, however the April-June quarter is typically a very important one as the harvest season falls during this time,” Sanghi said.
Experts also suggest that even though the retail sales declined, the dispatches were in green, owing to channel filling before the marriage season next month (especially for 2Ws) and improvement in supply chain situation.
Motilal Oswal stated that bookings across PVs have largely remained stable for Maruti Suzuki, while there was about a 5-7% decline in bookings for M&M and Tata Motors. Bookings for the new model Fronx now stands at over 23,000 units. In CVs, fleet availability remains healthy, led by demand from construction-led activities, auto carriers, white goods, and FMCG. This has consequently resulted in a healthy fleet utilization level of about 80%.
In April 2023, wholesale volumes for PVs is estimated to grow 12% YoY, CVs by 11%, two wheelers by 4%, tractors by 1% and three wheelers by 21%, it said.
Anand Rathi research also expects the two wheeler volumes during April 2023 to have grown in double digits YoY, aided by urban and rural replacement demand and production ramp-ups of BS-VI phase-2 models. Also, PV volumes are likely to have grown in near double digits owing to healthy order books and launches despite supply constraints.
CVs are likely to have maintained their growth momentum, driven by replacement demand due to healthy freight volumes and rates, even with early buying in the last quarter. In contrast, tractor volumes are likely to have been flattish due to heavy rainfall and hail storms across parts of the country, it said.
Maruti’s Chairman RC Bhargava recently said that the visibility of chip supply in the first month of the ongoing quarter looked worse. The company expects the shortage of chips to continue to impact production in the current fiscal year.
Going forward, Sanghi expects the overall sentiment during the month of May to be better than April, however “a lot will also depend on the government’s procurement of grains, as it has a direct impact on rural income.”
To run welfare schemes, every year the government procures food grains from the farmers and gives them an assured price for the grains, which is called the Minimum Support Price (MSP).
