Low base recovery, pent-up demand swell sales, Auto News, ET Auto

New Delhi: Most of the auto OEMs have reported surge in year-on-year sales in June 2021 with triple digit growth for passenger vehicles. However, the green shoots may be credited to the unusual low base of last year, easing of COVID-19 lockdown restrictions in several parts of the country, and the dealership inventory building to meet the pent-up demand. (Auto companies in India report their dispatches to the dealers as their monthly wholesale figures.)

Fiscal year 2021-22 began with hopes of month-on-month sequential recovery. But it was hampered by the catastrophic second wave of the pandemic and the phased lockdowns from mid-April to most part of May. Thus, June can be seen as the first month of this fiscal year to have sustained plant operations in many areas of the country compensating for the volumes lost in April and May.

Going forward, OEMs are pinning hopes on the upcoming festive season. However, most of them are increasing prices due to the spike in input costs. Global semiconductor shortage, fear of the Covid third wave, sharp increase in fuel prices and the rise in ownership cost are also being seen as some of the challenges.

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

Passenger Vehicles

Market leader Maruti Suzuki India Limited (MSIL) saw an uptick of 156% at 147,368 units in its total (domestic + exports) sales in June 2021 as against 57,428 units in June last year.

“Sales in Q1 of both FY21 and FY22 have been far from normal owing to the Covid-related lockdowns and disruptions and hence any comparison would not be meaningful,” MSIL said in a regulatory filing.

Source: Industry Data

Shailesh Chandra, president, passenger vehicles business unit, Tata Motors, said, “In the EV segment, despite witnessing difficult business conditions, the company posted the highest-ever quarterly sales of 1,715 units. This was on the back of increasing demand for Nexon EV, which posted its highest-ever monthly sales of 650 units in June 2021.”

“The PV industry continues to witness uncertainty on account of global semiconductor shortage and rising commodity prices, while the demand side is on a progressive recovery path. We continue to see strong customer interest in our product offerings, resulting in a strong order book and we aim to fulfill those to the best of our abilities in this supply-constrained environment,” Chandra said.

Rajesh Goel, senior vice president and director—marketing and sales, Honda Cars India, said, “Our June dispatches were in line with our production, which we maintained at below 50% of the pre-COVID level. With the unlocking of many states and reopening of dealer outlets in most markets, we expect car sales to pick up from this month onwards and will accordingly ramp up our daily production.”

Two-wheelers

India’s largest two wheeler maker Hero MotoCorp recorded a marginal sales growth of 2% year-on-year. “Heading into the upcoming festive season, the company remains cautiously optimistic about the customer demand in the coming months. The expected surge in personal mobility, forecast of a normal monsoon in several parts of the country and the improving rural sentiment are expected to lead to a swift revival in sales,” the company said.

“We have reduced the dealer stocks to support our dealers and channel partners and will produce to maintain adequate inventories for customer demand,” TVS Motor said.

Ratings agency ICRA has maintained its growth forecast for two-wheeler sales at 12%-14% for the ongoing fiscal, despite the second wave of the Coronavirus pandemic hitting non-metro and hinterlands that dampened rural consumer sentiments.

“While the overall consumption and investment demand may take some time to recover after the devastating second wave, India’s rural economy is expected to provide some support,” it said.

ICRA added that expectations of a healthy rabi production, the timely arrival of the monsoons, a hike in minimum support prices for Kharif crops and other income support schemes by the government are likely to help revive rural demand sentiments and support the two-wheeler offtake in the festive season. The continued preference for personal mobility solutions, amid the pandemic, would also drive up some demand.

Commercial vehicles

Girish Wagh, ED and president, commercial vehicles business unit, Tata Motors, said, “With demand across all segments impacted, we realigned our production to the revised retail visibility. The trucker and tipper sentiment indices saw a sharp drop, being comparable only with the level seen during the complete lockdown last year. However, with easing restrictions and gradual reopening during the last fortnight of June 2021, we are witnessing increasing enquiries and retails.”

“We continue to cautiously monitor the situation and dynamically align our business agility plans to the evolving scenario,” Wagh added.

Veejay Nakra, chief executive officer, automotive division, M&M Ltd., said, “With the opening up of the market in a phased manner, we are seeing a boost in demand in both the urban and the rural areas and we expect the upward trend in demand to continue across all segments and markets. As we come out of the second wave of the pandemic, by and large our supply chain has stabilised except for the global semiconductor issue, which still continues to be a challenge that we are addressing as top priority.”

With the improvement visible in fleet utilization and the loan recovery rate, CV demand sentiments remain intact in June. However, with the gradual opening of the economy, the overall volume of the CV segment is expected to recover with the demand from the infrastructure and construction sectors.

Tractors

According to Hemant Sikka, President – Farm Equipment Sector, Mahindra & Mahindra Ltd., the sharp fall in Covid-19 cases and resultant easing of related restrictions, arrival of timely monsoon, increase in MSP rates for key kharif crops and continued strong Government support to all agri activities is giving a very strong momentum to tractor demand. “We continue to remain optimistic about the progress of the monsoon and tractor demand in the coming months. In the exports market, we have sold 1347 tractors with a growth of 92%,” he said.

Escorts said that the on-ground situation eased in June as the second wave of pandemic started diluting. “Our inventory levels, both with the company and with the channel, continue to be at normal levels. We remain optimistic for the rest of the fiscal year, as timely and expected above-normal monsoon, increase in the minimum support prices, and record direct procurement by the government is leading to a positive buildup of farmer sentiments,” the company said.

The company also announced price hike of its tractors with effect from July 1, 2021 due to rise in inflation. This is the third consecutive price increase of Escorts in the past nine months.

“While we are trying to offset a part of the input cost increase through internal cost control measures, we have announced a significant price hike effective July 1, 2021, on all tractors. Despite this, inflation continues to put pressure on the margins,” Escorts added.

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