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While August saw passenger vehicle sales increasing year-on-year for the first time since Covid-19 struck, along with a similar positive momentum seen in two-wheelers as well, this trend was not reflected across all companies in the sectors.
Plans to ramp up inventory levels only from September, inability to build inventory in August due to unavailability of models, limited presence in rural areas which mostly spurred demand, supply chain constraints and lockdowns are some of the reasons why this happened.
The increase in y-o-y sales during August was owing to factors like the low-base effect of August 2019, pent-up demand, preparation for the upcoming festival season and rural market demand. This positive momentum in y-o-y sales in August wasn’t shared by companies like Toyota Kirloskar, Honda Cars, Volkswagen, Ford, Skoda, Nissan, Bajaj Auto, TVS Motor, Royal Enfield and Suzuki Motorcycle India.
“Sales, production and demand are affected by lockdowns, supply side interruptions (and) import disruptions which affect companies differently depending on their location,” Rakesh Sharma, Executive Director, Bajaj Auto, told BusinessLine . He also emphasised that a month’s sales outcome is not sufficient to derive conclusions for either the industry or individual companies given the “volatile times”. A YTD comparison — during which both PVs and motorcycles declined by around 47 per cent in the April to August period compared to the same period last year — would be a better indication, Sharma added.
Pace of recovery
Rajesh Goel, Senior Vice-President and Director - Marketing & Sales, Honda Cars India Ltd, said the company’s current pace of recovery since the lifting of the lockdown is as per its plans in terms of demand and supply as it is gradually ramping up production. While Honda Cars started production at 25 per cent of pre-Covid level in mid-June, it ramped up to 70 per cent in July and August. “From this month, we are moving to daily production numbers at 100 per cent of pre-Covid level and we are optimistic about the upcoming festival period and expect demand to improve further. Our recent product launches and production ramp up will reflect in our sales performance in the coming months,” he added.
Since a decent share of demand in August accrued from tier-2 and tier-3 towns and rural areas, carmakers, with a limited presence in such areas, or with product offerings not befitting in the desired price range, haven’t been able to benefit from it, said Suraj Ghosh, Principal Analyst-Powertrain Forecasts, IHS Markit.
Certain car and utility vehicle OEMs were not able to build inventory in August due to unavailability of models , Hetal Gandhi, Director, Crisil Research, pointed out. “Also, a few OEMs have not witnessed good traction for their key models. Going ahead, inventory is expected to be built by these players in September in preparation for the upcoming festive season,” she added.
Two-wheeler players
As for two-wheelers, while players who have shown better performance started stocking up at the dealer level in August for the upcoming festival season, other players have decided to do that from September as dealers of most of these OEMs were at comfortable inventory levels given that the retail demand was low, said Gandhi. Besides, these players continued to face some supply chain constraints during August which led to delay in despatching vehicles at dealer level, she added.
OEMs that were unable to build sufficient inventory in August are likely to do so in September, said Gandhi.
Continuing lockdowns in smaller towns and economic distress are constraining factors which are slowing the recovery, Sharma pointed out. “We believe that demand is almost back to almost 90 per cent of the same period last year and should progressively reach last year levels in a couple of months,” he said.
Industry performance from Q2 months of July and August, although on a low base when the industry de-grew the most last year, is definitely encouraging, but we need to assess the situation month by month, to see if this performance can be sustained, cautioned Goel.
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