The domestic automobile dispatches (wholesales) in January sustained demand across segments, mostly due to the new launches, and companies are expected to continue the momentum in the current quarter.
In the passenger vehicle segment, though, market leader Maruti Suzuki India reported a marginal decline year-on-year (YoY) in its wholesales to 1,39,002 units during the month as compared with 1,39,844 units in the corresponding month last year.
Similarly, in the two-wheeler segment, market leader Hero MotoCorp reported a decline of 4 per cent YoY in its sales to 4,67,776 units as against 4,88,069 units in January 2020.
“Post the wholesale push to capture year-end sales before sticker prices increase, January dispatches softened due to combination of demand slack, supply chain issues.
The increase in product prices in the first quarter of this calendar year in the wake of higher input costs is likely to keep consumer sentiment in check. Urban demand revival could be key,” said a report by ICICI Securities.
Tailwind factors
According to Motilal Oswal Institutional Equities, with pent-up demand largely met, it would be critical for demand to sustain in the current quarter and beyond — considering the expected price hikes as well as opening up of public transport in many parts of the country. “Current valuations suggest recovery is likely to sustain (our base case), leaving limited margin for safety from any negative surprises,” it said.
However, according to the manufacturers, the demand momentum should continue. “With the Covid vaccination drive currently in progress, we expect it to propel positivity in the market, resulting in a steady demand, going forward,” Rajesh Goel, Senior Vice-President and Director, Marketing & Sales, Honda Cars India, said.
Similarly, for the two-wheeler segment, the incremental volumes are expected because of the low base effect to remain in play till the end of fourth quarter and continue into the first quarter of the next fiscal year.
“We are hopeful that re-opening of colleges, on-going Covid vaccination drive and stronger urban demand will act as a tailwind for domestic two-wheeler demand recovery, moving ahead.
Adding to this, the higher Capex allocation on infrastructure development, new health infrastructure push, increased crop procurement payment to farmers and new scrappage policy in the Budget can boost sentiments further,” Yadvinder Singh Guleria, Director-Sales & Marketing, Honda Motorcycle & Scooter India, said.
For the tractor and commercial vehicles too, companies see demand continue to be strong with expansion in Rabi acreage, high reservoir levels and higher liquidity in the hands of farmers with timely Kharif procurement, and opening up of many infrastructure avenues in the coming months respectively.