September 2020 Sales Analysis: Low base recovery, festive season readiness swell sales

New Delhi: Riding through a roller coaster of slowdown in the industry, coupled with the Coronavirus pandemic for the past six months of the fiscal year 2020-21, most of the auto OEMs have reflected their sales in green with a double digit growth in September 2020.

Halfway through this year, sales have increased on a sequential basis and September has witnessed the best performance so far. This may be attributed to the pent-up demand, preference for personal mobility during the pandemic, gradual opening up of tier- 2, 3 markets, easing of supply chains, labour availability, excitement of new launches and pushing up of stocks at dealerships, with high expectations of the upcoming festive season.

Analysts also said that festivals like Onam and Ganesh Chaturthi in South-West markets compensated for the inauspicious period of Shraadh and Adhik Maas in North India, during the past month.

However, the growth rate for 2020 is also a reflection of the low base last year, owing to the long-term slowdown. As per experts, the auto industry is far from normal and still has a lot of catching up to do amid the Covid-19 scare and the economic uncertainty in the country.

Meanwhile, it must be noted that auto companies in India report their dispatch from factories to dealers as their monthly wholesale figures.

Going forward, the demand is expected to be better due to improving finance availability and the gradual pickup in business due to festivities. Experts believe that growth may be muted post the festive period when the real test of market demand will begin.

Mitul Shah, Vice President (Research), Reliance Securities said, “Monthly volume performance by most automobile companies are encouraging with healthy rural sales and revival from urban markets recently. Passenger vehicles and two wheeler segments already started witnessing Y-o-Y growth with decent inquiries and bookings. Moreover, improving sentiment, favourable monsoon, higher agri output, all these factors have contributed.”

Passenger Vehicles

Market leader Maruti Suzuki India Limited (MSIL) saw an uptick of 31% in its total (domestic + exports) sales, majorly riding on the entry-level mini segment models where the carmaker reported a growth at 111,459 units in the month of September 2020 over the same period last year. The company’s exports which were under stress until now, also saw green shoots.

For H1 FY21 (April-September 2020), MSIL recorded a 36% decline in the domestic PV segment at 423,689 units as against 663,522 units in the same period last year.

The country’s second largest carmaker Hyundai Motor India Limited (HMIL) highlighted that its latest models have contributed to its growth for September 2020.

Kia Motors India registered its highest-ever sales in the country last month, driven by Sonet which made its debut on September 18.

Shailesh Chandra, President, Passenger Vehicles Business Unit, Tata Motors said, “In September 2020, wholesales were higher than retail ahead of the festive season. Despite challenges owing to rising Covid-19 cases across the country, supply-side has been progressively improving. The steep growth in September 2020 is attributed to increased demand for all our products in the ‘New Forever’ range.”

Veejay Nakra, CEO- Automotive Division, M&M said, “We are happy to witness a growth of 6% in Utility Vehicles. With market sentiments indicating a robust festive demand across segments, both in rural and urban markets, we are positive that this festive season will augur well.”

Talking on similar lines, Naveen Soni, Vice President- Sales and Service, Toyota Kirloskar Motors said, “September has been our best month so far, ever since the pandemic hit us in March 2020. Factors leading to this can be attributed to the pent up demand amongst customers as well as the onset of the festive season. Another factor leading to better demand could be attributed to the new launches in the market.”

Two Wheelers

The largest seller of two-wheelers in India, Hero MotoCorp recorded total sales of 715,718 units in September 2020, which it claims to be the highest sales in a single month in the calendar year of 2020.

In the second quarter (July-September 2020) of the current fiscal year (FY’21), the segment leader sold 18,14,683 units clocking a growth of more than 7.3%, as against 16,91,420 units sold in the second quarter of FY’20.

“To partially offset the rising input costs and commodity prices, the Company has made an upward revision in the ex-showroom prices of its motorcycles and scooters by up to 2%, with the exact quantum varying on the basis of the model and specific market. The revised prices are effective from October 1, 2020,” Hero MotoCorp informed.

Two and three-wheeler maker Bajaj Auto recorded its highest-ever monthly exports at 185,351 units in September 2020 with a growth of 16%. Its commercial vehicle sales however continued to decline.

Commercial Vehicles

Reeling under the impact of a sharp drop in volumes due to economic uncertainty and revision in load carrying norms, commercial vehicle has been the worst-hit segment in the industry. The sales have improved month-on-month, with September 2020 witnessing single digit decline as compared to the same period last year.

However, the overall inquiry levels of the commercial vehicle segment are still at all-time lows despite the healthy uptick in demand from the e-Commerce, FMCG and agriculture transport sectors. Owing to the absence of major infrastructure and construction projects, Covid fear of public transport and economic slowdown, light commercial vehicles (LCV) are expected to make better sales than heavy & medium commercial vehicles (M&HCV).

Girish Wagh, President, Commercial Vehicles Business Unit, Tata Motors said, “In September 2020, the offtake was higher than retail, as we prepare for sequential improvement in retails in the coming months. Our BS-VI products are receiving very good response from customers.”

Tractors

Hemant Sikka, President - Farm Equipment Sector, Mahindra & Mahindra (M&M) said, “Retail demand continued to be buoyant backed by a very good monsoon, higher kharif acreage and continued government support, including higher MSPs for key crops. We are looking forward to a very robust demand for the festive season ahead.”

According to Escorts, the rural demand continues to remain positive led by lower base of last year, pent-up demand from Covid-19 related lockdowns, and fundamentally positive macroeconomic factors.

It further said that timely and widespread monsoon, record Rabi crop production, early Kharif sowing, and good availability of retail finance have helped drive positive farmer sentiment.

"While currently operating close to our peak capacity, we are trying to further ramp up production and supply to meet the excess demand. We remain optimistic for the coming festive season," Escorts added.