Auto Sales In India Fail To Live Up To Expectations During Festive Season
Cars stored in a parking lot in California, U.S. Photographer: Bing Guan/Bloomberg  

Auto Sales In India Fail To Live Up To Expectations During Festive Season

Indian automakers shipped more vehicles from their factories this festive period than last year, hoping for a recovery from the pandemic, but retail demand fell short of expectations.

“While there is demand but not much year-on-year growth. We expected single-digit growth, and it’s on the same lines,” Ashish Modani, vice president and co-head of corporate ratings at ICRA Ltd., said over the phone. The double-digit growth that original equipment manufacturers were expecting hasn’t happened, he said.

Passenger vehicle sales in India had accelerated in October for third straight month as automakers ramped up factory-gate shipments to cater to potential demand during Navratri, Dussehra, and Diwali. India’s largest carmaker Maruti Suzuki India Ltd.’s October dispatches rose 17.6% over a year earlier to more than 1.6 lakh units, while the nation’s biggest two-wheeler maker Hero MotoCorp Ltd. reported a record 8 lakh wholesales, producing 30,000 units a day.

Automakers ramped up output and pushed inventory to make up for a complete washout in the early part of the Covid-19 lockdown in March and April, and slow recovery. But at least two dozen dealers BloombergQuint spoke with in 10 cities suggested that retail auto sales rose in low single digits compared with the expectations of 15-20% growth in the festive season last year.

Two-Wheelers

A workers wheels a scooter through the dispatch bay of the Hero MotorCorp plant in Gurugram, Haryana, India. (Prashanth Vishwanathan/Bloomberg)
A workers wheels a scooter through the dispatch bay of the Hero MotorCorp plant in Gurugram, Haryana, India. (Prashanth Vishwanathan/Bloomberg)

One of the large dealers for Hero MotoCorp in Delhi-National Capital Region failed to cross last year’s sales. He is now sitting at an inventory of nearly five to six weeks, said the dealer, who didn’t want to be identified out of business concerns. If the demand does not improve, the inventory will start to cause stress, he said.

About 800 kilometres east in Prayagraj, Uttar Pradesh, Ankit Srivastava, who runs two dealerships of Hero MotoCorp, saw a 7-8% year-on-year festive season growth. Takeoff in rural demand made up for the loss of urban sales, he said. He expects the demand to continue till December and his inventory is down to seven to eight days.

Hero MotoCorp, in an Nov. 18 exchange filing, said it sold more than 14 lakh units of motorcycles and scooters in retail sales during the festive season. During the 32-day period, retail demand reached 98% of the last year’s volumes. Meaning, the company didn’t report growth over a year earlier.

Other two-wheeler makers too struggled to breach last year’s festive demand.

A dealer for Honda Motorcycle and Scooter India Ltd. in Kolkata said his sales fell 30% short of a year earlier. The dealer, who spoke on the condition of anonymity out of business concerns, is now sitting on an inventory of about a month.

A Vadodara-based TVS Motor Co. Ltd. dealership saw sales contract 30% over the last festive season. Soyeb Saiyed, sales manager, said walk-ins have almost stopped post Diwali, and the dealership is saddled with a month’s inventory. “We are worried about the growth ahead. Festive sales failed to spur growth and now there is fear of another lockdown,” he said. “If that happens, we aren’t sure what are we going to do with the inventory.”

At Raj Bajaj, a Bajaj Auto Ltd. dealership in Navi Mumbai, things are looking up. Pawan Singh, sales manager, said the demand was 15% higher than the previous festival season. Singh said the dealership has a waiting period of 10-15 days.

Cars And Utility Vehicles

A worker cleans a Suzuki Motor Corp. vehicle outside a dealership for Maruti Suzuki India Ltd. vehicles in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)
A worker cleans a Suzuki Motor Corp. vehicle outside a dealership for Maruti Suzuki India Ltd. vehicles in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

At Maruti Suzuki’s Nexa dealership in Noida, sales failed to cross last year’s numbers. But Indore’s Rukamini Motors, a dealer for the maker of Baleno, saw a 15% growth and now has 10-15 days of inventory. “The pickup has slowed down post Diwali, but the footfalls have continued,” Pinto Birla, sales manager at the dealership, said over the phone.

Anil Goel, owner of Delhi NCR-based Himgiri Group that runs dealerships of Hyundai Motor India Pvt. Ltd., the country’s second largest carmaker, said the sales rose 5% over last year’s festival demand. Yet, it is hard to say if the worst is over for the auto industry, he said. He is now sure how the demand will pan out in the coming months.

For a Toyota India dealership in Noida, the festive sales contracted 10% year-on-year. Kapil Pichodia, general manager at the dealership, said the inventory level is under control so far as the supply is being managed based on demand.

At Tata Motors Ltd.’s dealer in Jaipur, festive sales surged 25% year-on-year, according to Ajay Sharma, general manager, sales. There is a shortage of vehicles at the dealership and the waiting period is around 40 days, he said. Sharma expects the demand buoyancy to continue till December.

Hero MotoCorp, HMSI, TVS Motor, Bajaj Auto, Maruti Suzuki, Hyundai Motor, Toyota and Tata Motors are yet to respond to BloombergQuint's emailed queries.

“Overall, the situation is positive, largely for four-wheelers, as the demand surely picked up, and 70% of the pent-up demand is now over,” Vinkesh Gulati, president at Federation of Automobile Dealers Association said. For two-wheelers, he said, there could be a concern of large inventory build-up.

Agreed Goel of Himgiri Group, which also operates a Hero MotoCorp dealership in Delhi NCR and is sitting on two months of inventory. If the wholesale numbers continue at the same levels in the two-wheeler segment, it could lead to a large inventory pile-up, he said.

The widening gap is a concern, said Modani, adding that no one is sure if demand will sustain.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.