Most Auto Firms Saw Demand Rebound In July, Say Brokerages
Sales continued to recover for most Indian automakers in July as lockdown restrictions were eased.
Sales numbers continued to recover for most Indian automakers in July as lockdown restrictions were eased, according to brokerages.
Factory-gate shipments of passenger cars, and two-wheelers rose in the range of 6-18% month-on-month in July, according to data compiled from the reports of Nirmal Bang, Emkay Global, Jefferies and Motilal Oswal. But Escorts Ltd. and Mahindra & Mahindra Ltd. saw sales plunge 32% and 35%, respectively, due to a seasonally slow month.
The revival in the demand for most segments comes as a relief after sales tumbled in May when states imposed curbs to contain a deadly second wave of Covid-19. That stalled the nascent recovery after the disruption caused by the national lockdown a year earlier.
“Our channel checks indicate that positive momentum witnessed in June should continue in July, aided by the easing of lockdowns and pent-up demand across regions,” Emkay Global said in a research note. They expect a sequential improvement in volumes across segments, barring tractors.
Passenger vehicles rebounded faster on increased preference for personal mobility.
“Inquiry levels are healthy and up by 10% over Jul 2019, while bookings are flat,” Motilal Oswal, said in a note. “Salary increases for government employees have also created demand, leading to higher retail.”
While two-wheeler industry is also seeing uptick in sales, recovery has remained slow. This is because of rising fuel prices, impact of the second wave and the fear of a third wave, Motilal Oswal said. Inventory stands at 45-60 days, it said.
Inquiry levels in the domestic two-wheeler markets are gradually improving with the entry segment witnessing better trends on the back of improved rural sentiments, according to a report by Nirmal Bang Institutional Equities. They, however, expect the original equipment makers with a higher export market exposure to perform relatively better, he said.
Tractor recovery has slowed due to a seasonally slow month as buying happens around June. Commercial recovery has also been slower, analysts at Motilal Oswal said, adding inventory levels for both stand at 30 days.
Outlook
Brokerages expect recovery to accelerate in the coming months on the back of improving consumer sentiment, faster vaccination and a pick-up in economic activities.
Demand for passenger vehicles, according to Motilal Oswal, will continue to be the least impacted and offers a stable competitive environment.
Two-wheeler demand is expected to improve with a gradual pick-up in inquiry levels and improving consumer sentiments, said Nirmal Bang.
Commercial vehicles, Nirmal Bang said, is likely to see a sharp uptick in volumes from the second half of the financial year as economic activity picks up pace and financing constraints are ironed out.
For tractors, strong underlying sentiments will aid volumes going ahead, it said.