BQ Survey | Disruption By Stricter Emission Standards Worsens Auto Slowdown

“February is usually not a volume-heavy month and across our dealerships, we are expecting a double-digit drop in sales on a year-on-year basis,” said Kunal Vikram Singh, owner of multiple cars and two-wheeler dealerships of companies, including MG Motor and Royal Enfield, in Mumbai. Even as enquiries and footfall have been more or less the same, consumers have not been concluding the purchase, he said.

Indians are spending less as the growth is set to fall to its lowest in more than a decade. Demand for automobiles has fallen and the industry is battling worst slump in decades, causing the inventory to pile up. While deep discounts helped cushion the sales a bit during the festival season and in December, both retail sales, measured by registrations, and factory-gate shipments tumbled in January due to disruption caused by the new emission norms. Automakers can only produce vehicles complying with the stricter Bharat Stage-VI standards from April this year.

“The industry has been in touch with OEMs (original equipment makers or auto manufacturers) for a smooth transition to the new emission norms,” said Nikunj Sanghi, managing director at JS Fourwheel Motors Pvt. Ltd., a dealer for Hero MotoCorp Ltd. and Mahindra & Mahindra Ltd. vehicles. “Almost all passenger car inventory, irrespective of brand or region, has been sold off and discounts too have come off sharply.”

Inventory position for two-wheelers and commercial vehicles is worse, according to dealers.

“There is visible stress in the system for both two-wheelers and CVs. Although the BS-VI transition is gaining momentum, there is overall higher inventory,” said Vinkesh Gulati, director at United Automobiles, a dealer of Bajaj Auto Ltd., Honda Motorcycle and Scooter India and M&M. “While the situation is not as bad as it was last time (transition from BS-III to BS-IV) when dealers resorted to “firesale” to liquidate the excess inventory, dealerships remain under pressure.”

Most dealers BloombergQuint spoke with don’t expect a revival in retail demand anytime soon.

Wholesales Likely To Fall

Wholesales, or factory dispatches, are expected to fall in February, according to BloombergQuint’s poll of four brokerages.

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

Ashok Leyland

• Demand continued to remain under pressure.
• Weak demand and BS-IV inventory management to hurt volumes.

Bajaj Auto

• Domestic wholesales to fall on weak retail sales.
• Export of two-wheelers to offset domestic volumes.

Eicher Motors – Royal Enfield

• Domestic wholesales to decline on weak retail sales.
• Dispatches were seen lower sequentially as well on account of supply issues.

Hero MotoCorp

• High BS-IV inventory and subdued demand to impact wholesales.

Maruti

• New product launches and BS-VI inventory to benefit wholesales.
• Retail enquiries remained stable but lack of inventories for some models restricted sales.

M&M

• Muted demand and inventory management ahead of BS-VI transition to hurt passenger vehicles.
• Tractors to be positive as rural demand seems to be improving on the back of a good rabi sowing season.

Tata Motors

• Weak demand due to overall slowdown and higher BS-IV inventory to hurt wholesales.

TVS Motor

• Weak retail sales to impact wholesales. Three-wheelers are likely to continue to witness strong demand in the export markets.

Watch | BS-VI Norms, Muted Demand Hurt Automakers