Mixed demand trends for autos in November as festive boost wears off but signs of rural recovery visible
- Indian auto companies are looking at mixed demand momentum after making merry post the festive season boost in October.
- The festive boost last month lifted the number of registrations across the passenger vehicles (PV), commercial vehicles (CV) and tractors segments in the range of 35-66% when compared to October 2019.
- However, PV sales are off to a slow start in the marriage season in November, despite an increase in discounts.
- Two-wheeler registrations are also still below pre-Covid levels, but the urban markets are driving the demand for scooter and premium motorcycles, say analysts.
The festive boost in October lifted the number of registrations across the passenger vehicles (PV), commercial vehicles (CV) and tractors segments in the range of 35-66% when compared to October 2019, according to a report by Jefferies.
While the marriage season has set in now, a report by Yes Securities states that passenger vehicles are off to a slow start in November despite an increase in discounts compared to October.
Commercial vehicles are also seeing an increase in inventories across companies, the report stated, adding “Large fleet operators have staggered their delivery schedules while retail customers' contribution is yet to come in full swing.”
Two-wheeler registrations still below pre-Covid levels
In October, an Elara Securities report stated that Hero MotoCorp reported a 17% decline in its overall sales, while Bajaj Auto reported a 10% decline. The only gainer was TVS Motors, which reported a 1.5% increase year-on-year.
Now, according to Yes Securities, overall two-wheeler retail sales could decline between 5-8% in November when compared to October. On a year-on-year basis, though, it notes that there could be flat to high-single digit growth.
“Compared to the past few months, 2W demand saw some bounce back during this festive season. However, the registrations were far from reaching the pre-pandemic levels in 2019,” said Nikunj Sanghi, former president, Federation of Automobile Dealers Associations of India (FADA).
Marriage season off to a slow start, SUVs perform relatively better
Sports utility vehicles (SUV), on the other hand, are seeing relatively better demand. However, companies are still facing supply chain issues, which is hampering their overall sales.
“PVs are still facing supply challenges in premium variants impacting overall model mix at retail level,” the report stated.
Higher discounts on entry-level cars as inventory builds up
Car makers are now offering higher discounts on entry-level cars as they attempt to reduce the inventory build-up, which has now increased to over 15 days, according to the Yes Securities report.
Overall, Maruti Suzuki, Tata Motors, and Mahindra & Mahindra are offering discounts and benefits in the range of ₹28,000-65,000, depending on the car being bought.
Rural recovery signs visible
Rural India, a critical market especially for two-wheeler and tractor makers, is showing signs of a recovery, according to analysts at Motilal Oswal.
“Rural recovery resulted in a healthy 26% and 30% YoY growth in 2W and tractor retails during festive season, respectively, even as secondary 2W dealers (mainly non-urban) saw strong demand revival,” the research firm said.
For instance, Royal Enfield’s Hunter 350, a premium motorcycle, has seen its waiting period increase from 1 month to 2.5-3 months, with dealer confidence seeing a sharp increase.
“Channel partners we spoke to are indicating high confidence post launch of Hunter with their volumes are ~15% lower than FY18 levels but are back to FY19 levels,” the Yes Securities report stated.
Tighter cash flows and slower uptake leading to inventory build-up of trucks
Commercial vehicles like trucks continue to witness an inventory build-up, with the key market of the northern belt witnessing under-utilisation, according to Yes Securities.
According to Yes Securities, tighter cash flows due to an increase in working capital requirements, customers have delayed delivery plans of booked vehicles, adding to the build-up of inventories.
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