Maruti Suzuki To Hero MotoCorp: Passenger Vehicle Sales Improve, Two-Wheelers Lag In December: Analysts
Sales of most Indian automakers recovered in December even as uncertainties around a shortage of chips persist.
Factory-gate shipments of passenger and commercial vehicles rose over the preceding month in December, while tractors declined in a seasonally weak period, according to BloombergQuint’s poll of four analysts—Dolat Capital, Emkay Global, Prabhudas Lilladher and Motilal Oswal.
“Passenger vehicle sales are faring better than the two-wheelers on the back of huge order backlogs,” Prabhudas Lilladher said in a report. Demand remains strong for sport utility vehicles and luxury cars but supply shortage is creating extended waiting periods, it said.
Demand continues to improve for commercial vehicles, it said, on better fleet utilisation, freight availability and easier financing.
Indian automakers’ business was on the decline in the years leading to the Covid-19 outbreak and a complete lockdown to contain the pandemic caused a washout last year. Then a global shortage of chips—that help control everything from the steering to emissions—stalled a nascent recovery.
That forced Maruti Suzuki India Ltd., among others, to cut output in the festive months. Yet, the nation’s largest carmaker showed the biggest improvement among peers in December.
A sequential improvement in supplies from original equipment makers was visible in December, Motilal Oswal said. The waiting period remained one-two months for fast-selling models of major OEMs, with that for Mahindra & Mahindra Ltd.’s XUV700 going up to 1.5 years, the brokerage said.
According to Dolat Capital, the underlying demand for passenger vehicles remained “strong as enquiry and booking continued to be healthy”.
Sales for two-wheelers, however, remained tepid in both urban and rural pockets as higher fuel prices restricted the pace of recovery, Motilal Oswal said, adding the inventory in the system is already at 60-75 days.
BloombergQuint's dealer checks revealed two-wheeler companies are pushing stock even as demand remains weak.
Emkay Global expects commercial vehicle volumes to improve, aided by strong demand for intermediate models/tippers and a pickup in replacement demand for multi-axel vehicles.
Dolat Capital expects issues related to semiconductor shortage to persist. The outlook, it said, remains uncertain for the next three-six months, resulting in lower inventory at dealerships and high waiting period for cars.
Prabhudas Lilladher is hopeful that the two-wheeler demand will recover as sentiments improve because of harvest income and subsiding impact of erratic monsoons. But unless retail sales pick up in the rural market, sales are likely to remain weak, it said.
Motilal Oswal expects the momentum in the commercial vehicle segment to continue. Growth, according to Dolat Capital, is likely to improve, driven by a pickup in infrastructure, construction and mining activities.