BQ Survey | Discounts Fail To Lift Auto Sales In August

“Dealers have been offering cash discounts and exchange bonuses but customers are just not looking to buy at the moment,” said Vinkesh Gulati, director of United Automobiles—a dealer of Mahindra & Mahindra Ltd—told BloombergQuint. “While enquiries and walk-ins have seen a substantial jump compared to last month, the conversion into actual sales is still not happening.”

Nikunj Sanghi, managing director at JS Fourwheel Motors Pvt. Ltd., a dealer of Hero MotoCorp Ltd., said August is generally weak and compared to at least the past two-three months, it has been the slowest in terms of retail sales. “However, there have been some positives in demand in the last few days in southern and western region on account of the upcoming Onam and Ganpati festivities.”

Last week, the government announced several measures to boost auto sales. That included clarity on vehicles to be sold before stricter emission standards kick in, a new scrappage policy, deferral of revision of one-time registration fee till June 2020 and lifting the freeze on government departments, urging them to buy new vehicles, among others.

While these measures will boost sentiment in the near term, automakers reeling under the worst slowdown in more than a decade said more sops are required to revive sales. Car sales slumped the most in almost two decades in July, according to latest data available with the Society of Indian Automobile Manufacturers. The falling volumes have forced companies to lay off contract workers and dealerships to shut showrooms. Vehicle demand is one of the indicators flashing red, besides consumer goods volumes, as India’s economic growth fell.

“It has been less than a week since the finance minister announced measures to revive the auto sector. It will take some time for things to take effect and there are positive signs with one of the large banks linking auto loans to the rate,” said Ashish Kale, president of Federation of Automobile Dealers Associations of India, and managing director of ‎Provincial Automobiles Company Pvt. Ltd. “Slowly things should get back on track, but August and September will mostly likely remain lean for the industry.”

Wholesale Volumes Set To Fall

Wholesales, or factory dispatches, generally rise in August as dealers stock up ahead of the festive season. But sales are expected to fall this time as automakers cut production to ease stress on dealers battling a bloated inventory, according to BloombergQuint’s separate poll of three brokerages.

“We expect Maruti Suzuki could report a 35 percent year-on-year dip in domestic volumes, affected by weak retails,” said Kapil Singh, auto analyst at Nomura. “The medium and heavy commercial vehicle industry is likely to witness a volume decline of about 44 percent in August.”

Raghunandhan NL, analyst at Emkay Global, said sales are expected to remain weak across all segments due to a high base, increasing cost of vehicle ownership, cutting inventory at dealerships and financing issues.

Here are the factors, according to Nomura, that could impact wholesale volumes for individual automakers:

Maruti

• Weak retail demand and high inventory levels to affect wholesales.

Ashok Leyland

• Weak demand and high inventory to affect medium and heavy commercial vehicle sales.

Bajaj Auto

• Domestic volumes to decline on weak demand.

Royal Enfield

• Launch of the Bullet 350 and 250cc to support volumes month-on-month.

M&M

• Weak demand to affect auto volumes; tractor to see some improvement led by early onset of festive season.

Tata Motors

• Medium and heavy commercial vehicles growth to slow down on weak demand.

TVS Motor

• Growth trajectory to remain slow on weak demand.