From Bajaj Auto To Maruti Suzuki, Record Exports Cushion Covid Hit
As the second Covid wave and rising fuel prices depressed domestic demand, record exports cushioned Indian automakers in the first quarter.
Passenger vehicle and two-wheeler volumes tumbled 30% and 45%, respectively, over the prior quarter in the three months ended June, according to data by the Society of Indian Automobile Manufacturers. Exports for the two segments, however, rose 12.5% and 3%, respectively, during the period.
“Exports have definitely provided a breather to the auto industry across segments which was never seen before,” Hetal Gandhi, associate director at Crisil Ltd., told BloombergQuint over the phone.
With inventory sitting idle, makers of cars and scooters have turned to overseas markets to maintain production levels, she said. “Whatever would have been the impact of the second wave on the domestic volumes, a large portion of it has been covered up by exports.”
A deadlier resurgence of the pandemic interrupted a nascent rebound for the automobile market. Local curbs forced dealerships to close temporarily or open for fewer hours a day, crimping demand. Makers of cars to scooters even resorted to output cuts. Without exports, the contraction in sales would have been much worse.
Exports were strong due to improved sentiment in Africa and Latin America markets because of the stimulus packages and revival in rural demand in those countries, said Abhishek Jain, auto analyst at Dolat Capital. Asean bloc nations, another key market for Indian companies, have yet to recover though, he said.
Two-Wheeler Exports Hit Records
Two-wheeler sales tumbled the most as the pandemic only worsened the slowdown caused by an increased cost of ownership prior to Covid-19. Rising fuel prices, series of price hikes to counter higher commodity costs, and a severe second wave that ravaged the hinterland further dented demand.
Exports came to the rescue, in part. In the April-June quarter, two-wheeler exports hit a record 11.3 lakh units. Bajaj Auto Ltd., TVS Motor Co., and Hero MotoCorp Ltd.’s overseas shipments surged to all-time highs.
The share of exports in total two-wheeler volumes jumped from 25% in January-March to 47% in the three months ended June, according to data shared by Crisil.
“Pandemic has definitely changed automakers outlook towards exports and is making them realise that having a diversified geographic presence definitely helps them to tide over such storms, and keep the operations going,” Rohan Kanwar, assistant vice president of ICRA Ltd., told BloombergQuint. Makers of motorbikes and scooters are on track to ship record number of units overseas this fiscal, he said.
Passenger Vehicles Getting There
While not at the same pace, overseas shipments of cars and utility vehicles also jumped. According to Crisil and SIAM data, the share of exports rose from 12% of the total passenger vehicle volumes in the quarter ended March to 20% in the three months through June.
Maruti Suzuki India Ltd., the nation’s biggest carmaker, exported record 45,056 units in the first quarter, Crisil data showed.
“Exports always complement and add to the overall production, but this year it has been a little more, so obviously it has helped us,” Shashank Srivastava, executive director-sales and marketing, Maruti Suzuki, told BloombergQuint. Africa and Latin America, he said, were the top overseas markets.
Will The Surge Sustain?
Srivastava acknowledged that there has been pent-up demand because some of the countries were closed earlier. But he said that overseas demand seems sustainable.
TVS, which exports about one lakh units a month, expects the momentum to continue. Two-wheelers exports are likely to grow at the same pace in the coming quarters as demand is fueled by rising consumption, and stable economic and political situation in all TVS-operating geographies, the company said in its earnings call. Stable oil prices will have a positive impact on oil-dependent economies of Africa, South and Central America, it said.
Bajaj Auto, India’s largest two-wheeler exporter, is also confident of maintaining export growth. Its overseas shipments were the second highest in April-June, overcoming lower sales in the Philippines, Uganda, and one country in Latin America.
“It’s quite exemplary because it is (the growth) despite these key markets holding us back,” Bajaj Auto’s management said in its earnings call. “Hopefully, as the pandemic recedes in these places, we’ll be able to strengthen our export performance further.”
Analysts, however, are less sanguine. Gandhi of ICRA said once the utilisation levels pick up in the domestic market, exports are unlikely to be a long-term story.
Jain of Dolat Capital sees a challenge as Chinese firms ramp up production. Demand from overseas market, however, could continue for another six months for passenger vehicles.