Two Factors Analysts Say Aided Auto Sales In September

Automobile wholesales continued to rise in September as companies pushed up stocks at dealerships anticipating higher demand ahead of the festive season and on low base, according to three brokerages.

Factory-gate shipments of automakers rose in the range of 12-80% over the preceding month in September, data compiled by research reports of Nomura, Emkay Global and Dolat Capital showed. On a year-on-year basis, while sales of most two-wheelers, passenger cars and tractors rose, commercial vehicles remained under pressure.

The higher-than-average rainfall and increased kharif sowing, analysts said, drove demand for tractors and entry-level motorcycles. Yet, easing restrictions in urban areas, besides favourable base and inventory filling, led to higher passenger vehicle sales than two-wheelers during the month, they said. Commercial vehicles remained under pressure compared to last year but improved sequentially, primarily led by sales of light and intermediate vehicles.

India’s auto sales were already slowing before the pandemic on higher upfront costs and new emission standards. The world’s biggest lockdown, effective March 25, completely stalled operations, leading to a washout in April. Sales, however, revived in subsequent months as the nation eased curbs.

Retail Sales

While analysts are optimistic, dealers prefer to remain slightly cautious over retail sales.

“Industry interactions indicate that retail sales were flattish for passenger vehicles and declined year-on-year for two-wheelers. But given the festive period is later this year, year-on-year comparison is not representative,” said Kapil Singh, research analyst at Nomura. “We expect festive season sales to be similar to last year for passenger vehicles and two-wheelers. We expect strong wholesales in September and October, followed by normalised level of volumes from November 2020 onwards.”

Vinkesh Gulati, president at Federation of Automobile Dealers Associations of India, agreed. Apart from the rural market, which was already reviving, urban centres for the first time showed initial signs of an improvement in demand, Gulati said, adding entry-level passenger vehicle sales are also showing signs of coming back. “But while OEM’s (original equipment makers) are dispatching vehicles to dealers with a purpose of stocking-up inventory for the upcoming festival season, retail sales are still at roughly 75% levels despite the low base of last year.”