A Yamaha Motor Co. employee stands near motorcycles displayed in a showroom in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Auto Sales Recover In March But...

Auto sales rose in March led by demand for two-wheelers and inventory levels fell, aided by production cuts after volumes declined in February.

Sales increased across categories month-on-month, with two-wheeler volumes jumping 10 percent, according to the data released by Federation of Automobile Dealers Associations. Two-wheeler inventory nearly fell by half over the previous month. Inventory had piled up in February as sales fell across categories.

“We at FADA believe that the worst for the auto industry is now behind us,” Ashish Harsharaj Kale, president at the federation, said. The dealers’ lobby expect sales to stabilise in their current normal range till elections conclude and India heads into the monsoon season, he said.

Still, volumes declined over March last year, signalling that the slowdown is far from over. And FADA acknowledged that the recovery in March was largely because of the production cuts by the automakers. Demand has slowed since September as compulsory thirty-party multi-year insurance increased upfront costs. Higher fuel prices also deterred buyers during the Diwali festival season, usually an auspicious period for purchases. Year-end discounts that continued in the new year failed to lift demand.

In fact, two-wheeler inventory had hit 80-90 days in February, which FADA had called “unsustainable” and “alarming”. It fell to 40-45 days in March.

According to FADA, here’s the inventory position in March compared with February:

  • Passenger vehicles: Down from 50-60 days in February to 40-45 days in March.
  • Two-wheelers: Eases from 80-90 days to 45-50 days.
  • Trucks and buses: Down from 45-50 to 40-45 days.

The Nifty Auto Index has fallen more than 6 percent so far this year. Except Tata Motors Ltd. and Bajaj Auto Ltd., all constituents have fallen. Jefferies, in its recent note, said “investor focus is likely to be on retail trends, dealer inventory levels and BS-VI pre-buying”.