Highlights
- November 2022 reported highest-ever PV wholesales for the month,
- CY2022 projected to touch peak PV sales at 38 lakh units, previous high was in 2018,
- ICRA expects PV volumes to touch about 37-38 lakh units in FY23,
- High ownership costs, financing rates remain issue in 2W sector,
- Sentiments are slowly improving at rural level, sustenance remains key,
- CV segment is out of an extended downcycle,
- Tractor volumes estimated to remain healthy during FY23,
New Delhi: Times have changed and brought cheers to the automotive industry as a whole. The change is reflected in the sales figures for November 2022. This time last year the industry continued to face headwinds owing to the global semiconductor shortage and the lingering threat of a new Covid variant, Omicron. Now these anxieties have fizzled out. However, all is not well. While some segments are cheering heads on, others still have to deal with perennial challenges as price hikes and rising financing costs.
The following is a segment-wise report of vehicle dispatches during November 2022.
Passenger Vehicles
The demand for passenger vehicles has remained healthy since the turn of the calendar year. Strong underlying demand and the easing up of semiconductor shortages enabled improved production across OEMs. Aided by the robust demand, PV industry wholesale volumes are expected to touch an all-time high of about 3.7million -3.8 million units in FY23 (a growth of 21-24% over the previous fiscal), Rohan Kanwar Gupta, Vice President and Sector Head – Corporate Ratings, ICRA Limited, said.
Factoring in the robust demand, the OEMs have now ramped up their capacity expansion plans by increasing outlays for the next few fiscals. ICRA expects the industry demand to remain steady and aid the industry volumes to grow by 6%-9% in FY24. Even as the underlying demand trends for the industry continue to be healthy, supply chain disruptions, however, would continue to be monitorable, in the backdrop of the ongoing geopolitical conflicts.
According to Shashank Srivastava, Senior Executive Officer (Marketing & Sales), Maruti Suzuki, the industry’s wholesales grew by 31% to 3.22 lakh units in November 2022 as against 2.45 lakh units in November last year.
This was also the highest-ever PV sales during November, when compared to the previous best of 2.86 lakh in November 2020.
The market leader reported a growth in all segments except for its Eeco van. Sales of mini cars, including Alto and S-Presso, increased to 18,251 units compared with 17,473 in the same month last year.
Maruti Suzuki’s utility vehicle sales, comprising Brezza, Ertiga and Grand Viatara, grew to 32,563 units compared with 24,574 vehicles in the year-ago period.
Srivastava also noted that CY 2022 will see record sales for the Indian PV industry as it is projected to touch the 38 lakh mark, against 30.82 lakh in 2021. The previous peak was in CY 2018 at 33.80 lakh.
He said that historically, December has been the second highest month for retail sales due to an anticipated price hike announcement by OEMs in January.
“The demand parameter seems to be steady at the moment but the industry needs to be vigilant about the impact of increase in repo rates during the past months, the cost of inventory financing, and projections of economic growth,” he said.
Tarun Garg, Director, Sales, Marketing & Service, Hyundai Motor India, said the company is well poised to achieve its highest-ever domestic sales in 2022.
Even though the maker of Creta has maintained its lead at the second spot, it witnessed tough competition from Tata Motors this calendar year. During the month of May, the homegrown automaker outperformed the South Korean carmaker by taking a lead of about 1,000 units. Even though it failed to replicate this performance in any other month, the gap between the two carmakers has significantly narrowed to just about 2,000 units as against four years ago.
The South Korean carmaker Kia said it dispatched 9,284 units of Seltos last month, followed by Sonet 7834 units, Carens 6360 units and Carnival 419 units. The company also delivered 128 units of EV6 in the domestic market.
Hardeep Singh Brar, Vice President and Head of Sales and Marketing, Kia India, said that starting the third shift at its Anantapur Plant earlier this year and gradually improving the supply chain have helped to streamline the vehicle delivery period. “However, we will observe the dynamic market conditions,” he said.
Veejay Nakra, President, Automotive Division, M&M, said “Our sales volume continued to grow in November powered by robust demand across our portfolios. We sold 30,238 SUVs in November, registering a growth of 56%. The supply chain situation continues to be dynamic due to the continuing international disruptions. We are keeping a close watch and are taking appropriate steps.”
Two-wheelers
Two-wheeler demand has remained weak over the past few years, with consumer sentiments impacted by factors such as income uncertainty during the pandemic period and a persistent hike in two-wheeler prices led by both regulatory changes and inflationary pressures. The festive season brought some respite to the sector, with retail offtake in October 2022 growing higher than in the pre-pandemic levels, Rohan Gupta of ICRA said.
Market leader Hero MotoCorp increased prices of its vehicles from December 1, which is the company’s fourth price hike in the current fiscal.
Going forward, ICRA remains cautiously optimistic about demand recovery in FY24 amid headwinds such as elevated ownership costs and increase in financing rates. Even as erratic monsoons and floods in many regions impacted Kharif yields, dealer check indicates that sentiments have started improving at the rural level; the sustenance of the same remains key for the industry.
A low base (even post a 7-9% growth YoY in FY23) is expected to aid a moderate YoY growth (i.e., 10%-12%) for the industry in FY24.
Even in November, the top two-wheeler makers reported double-digit growth on the low base of last year. Though there are signs of improvement, the economic health of rural India is not yet back on track, indicated by the lower sales of motorcycles.
On a sequential basis, November sales for all OEMs were in the red. In October, wholesales of two-wheelers were up in anticipation of the festive season demand.
The gap among the rivals has also been thinning over the past months. Hero MotoCorp, the largest seller of motorcycles reported a YoY growth of about 15%. Honda Motorcycle & Scooter India (HMSI), the company that sells largest number of scooters, reported the highest growth of 38% backed by demand in the urban sector.
Atsushi Ogata, Managing Director, President and CEO, HMSI, said, “After a successful festival season, HMSI continues to witness consistent demand in the market. There is now a growing need of mobility in urban India as offices and institutions open up and more and more people venture out. The industry has been witnessing a steady growth momentum.”
Three-wheelers, commercial vehicles
On a sequential basis, commercial vehicle sales declined from October 2022. However, sales were in the green compared to the year-ago period.
Market leader Tata Motors reported highest YoY growth in passenger carrier at 2,041 units, compared to 1,183 units in the year-ago period. M&HCV sales were also up at 8,879 units, against 6,266 units in November 2021.
However, its SCV cargo and pickup sales dropped to 13,048 units from 15,747 units dispatched a year-ago. I&LCV sales also declined to 3,462 units as against 5,099 units in November last year.
Sruthi Thomas, Assistant Vice President and Sector Head – Corporate Ratings, ICRA Limited, said that CY22 came as a year of relief for the domestic commercial vehicle (CV) industry. It has come out of an extended downcycle, with no unforeseen challenges emerging during the year. Accordingly, with the various growth drivers being intact, all the sub-segments reported sales increase, and these trends are expected to continue into the next year as well.
According to her, M&HCV trucks are expected to grow by 15%-20% in FY23 and 10%-12% in FY24, with growth continuing to be supported by traction in construction and mining activities, as well as the pent-up replacement demand.
While LCV truck demand is likely to soften to some extent, given the rural slowdown and base effect catching up, it is expected to continue growing at 13%-15% in FY23 and 4%-6% in FY24 supported by the demand for last-mile transportation from the e-commerce companies. Revival was also visible in the bus sub-segment in CY22, with abatement of the pandemic-related challenges and the opening of the educational institutions and offices. This would continue into the next year as well with 90%-95% growth estimated for FY23 and 18%-20% for FY2024.
Tractors
Hemant Sikka, President – Farm Equipment Sector, Mahindra & Mahindra, said, “Demand continued to remain strong in the post festival period on account of brisk sowing of rabi crops, fuelled by high moisture content in the soil and healthy reservoir levels and is expected to beat last year’s record sowing of 70 million hectares.”
“Procurement of Kharif crop has been progressing bringing liquidity to farmers. This augurs well for the tractor industry’s growth,” he said.
“Post festive season, demand continues to be normal. While rural sentiments continue to remain favorable owing to improved Rabi sowing assisted by good monsoon this year and better water level in reservoirs, softening in commodity prices is not happening at desired pace leaving input costs to be higher than anticipated,” Escorts Kubota said in a statement.
Gupta of ICRA noted that the tractor Industry volumes have remained at healthy levels in the ongoing fiscal, aided by decent farm cash flows. The country recorded above-normal rainfall at 106% of the Long Period Average (LPA) in the South-west Monsoon season of 2022; the precipitation remained healthy across the country, barring the East/North-East region.
“Even as late precipitation led to a delayed harvest for the Kharif crop and impacted sentiments to an extent, the healthy reservoir levels have aided a strong start to the rabi sowing season and bode well for cash flows during the next harvest season. Industry volumes are estimated to remain at healthy levels in FY23 (0%-4% YoY growth on the back of a high base) and FY24 (4%-6% YoY growth), aided by favourable underlying drivers for rural cash flows; downside risk to estimates may arise upon uneven rainfall/consequent crop damage,” he said.
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The first half of the current financial year turned out to be the best-ever for PV segment, however concern still remains in the entry-level category of PVs and two wheelers alike. As for OEMs, Tata and Mahindra gained a portion of the pie while Hyundai lost about 3 percentage points. Similarly, Hero MotoCorp is also down by 3 percentage points while others like HMSI have reported a gain during the first six months.
