Auto Sales Sustain Post Festive Season, Say Analysts

Indian automakers in November shipped more vehicles from their factories than last year as demand sustained post festive season and on low base, according to three brokerages. But wholesales fell over the preceding month.

Factory-gate shipments of most automakers fell in the range of 4-25% month-on-month in November, data compiled from research reports of Motilal Oswal, Emkay Global and Jefferies showed. On a year-on-year basis, besides cars and two-wheelers, the makers of commercial vehicles—the worst-hit segment, first due to an economic slowdown and revision in load carrying norms, and then by the pandemic—saw a rise in shipments.

Demand for passenger cars and two-wheelers, analysts said, continued to improve on account of strong rural sentiment, improvement in finance availability, and a gradual pickup in business and economic activities. Easing of supply chain bottlenecks, too, aided the wholesales.

Commercial vehicle makers, according to analysts, witnessed signs of recovery as inquiries went up. The conversion to actual sales, however, remained low. Demand for tractors was robust due to good Kharif sowing.

Shipments may have fallen over the earlier month because of realignment of inventory levels at dealerships as the festive season concluded.

“November 2020 wholesales grew on a low base and to cater to spillover demand from the festive season and inventory refilling for passenger vehicles and tractors,” Jinesh Gandhi and Vipul Agarwal, research analysts at Motilal Oswal, said in a note. Since the festive season has augured well, current demand and low inventory sentiment suggest higher wholesales in December, they said.

According to Raghunandhan NL and Munumuksh Mandlesha, research analysts at Emkay Global, passenger vehicle volumes grew in double digits for most automakers. “Domestic volumes should grow by 102% for Tata Motors Ltd., 23% for Mahindra & Mahindra Ltd., 2% for Maruti Suzuki India Ltd.,” they said.

India’s automakers, which were grappling with a slowdown even before the pandemic, saw a recovery after the nation restarted most activities to revive sentiment and growth in the aftermath of one of the world’s strictest coronavirus lockdowns. The pandemic had stalled production and led to a washout in the initial months of the lockdown. Sales slowly picked up from July, mostly led by first-time buyers as people opted for personal mobility over public transport amid fears of contracting the infection. The optimism even prompted companies to push more stocks to dealers during the festive season even as that fueled fears of aggressive inventory dumping.

Overall passenger vehicle retail sales during the festival period were better than two-wheelers, Jinesh Gandhi and Vipul Agarwal, research analysts at Motilal Oswal, said in a note. “Demand is also seen sustaining post the festive season as there is a healthy number of bookings with dealers,” they said. But while the overall consumer sentiment has improved, the market remains cautious due to fears of a second wave of Covid-19.