Auto Sales In March 2022: Russia-Ukraine War Brings Back Supply Worries

Supply-chain and logistics issues on the back of Russia's war in Ukraine and muted two-wheeler demand weighed down on auto sales in March, according to analysts.

Factory-gate shipments of carmakers, barring Tata Motors Ltd., fell month-on-month in March, according to data compiled from research reports of Emkay Global, Jefferies, Nirmal Bang and Dolat Capital. Wholesales fell over a year earlier too, owing to supply issues.

“Though demand for PVs (passenger vehicles) is strong, dispatches to be affected due to continuing supply-side issues,” analysts at Dolat Capital said in the note. Supply issues will persist during the war, it said.

Fresh supply constraints underscore the risk to a rebound for India's automakers. Business was on the decline even prior to the pandemic and the global shortage of chips—that control everything from vehicle steering to emissions—had stalled the nascent recovery last year.

Still, analysts at Nirmal Bang expect passenger vehicle volumes to improve marginally month-on-month, led by pent-up demand and better supply-chain management by original equipment makers. “We expect the PV segment to recover faster on the back of sustained demand, low inventory levels and high waiting periods,” the report said.

Demand for two-wheelers, however, is likely to be weighed down by weak rural sentiment because of a fall in income during the pandemic, rising prices of motorcycles and scooters and costlier fuel.

Domestic two-wheeler dispatches are expected to improve month-on-month, albeit at a slower pace, with only a gradual pick-up expected in the coming months as schools and offices open, beginning of marriage season and festivals, analysts at Nirmal Bang said in the note.

Dolat Capital said high system-wide inventory in two-wheelers continues be a concern amid muted demand. But it expects volumes to improve.

“Demand for entry level motorcycles is expected to improve from April 2022 onwards with the beginning of the marriage season and opening up of offices and educational institutions,” analyst at Dolat capital said.

Still, Bajaj Auto Ltd., is expected to see its volumes decline in March by 1.67%.

Commercial vehicles sales continued to recover, led by higher fleet utilisation and high freight availability driven by pick-up in infrastructure, construction and mining activities.

“CV industry volumes are likely to improve, aided by improving chip supplies for LCVs and better demand for ICVs/Tippers,” Emkay Global said.