Auto sector shows signs of revival on back of entry-level cars

The auto sector which has been witnessing a significant slowdown in sales with a slackening of the economy for more than six months, now, with advent of the festive season has started to witness some signs of revival thanks to a surge in demand for small cars as well as two-wheelers.

Sep 04, 2020 JHARNA MAZUMDAR No Comments Like

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Auto sales showed signs of revival in the month of August mainly on the back of pent up demand, the festive season nearing, and customers concerned about safety preferring to drive their own cars and bikes rather than use public transport. 

The auto sector which has been witnessing a significant slowdown in sales with a slackening of the economy for more than six months, now, with advent of the festive season has started to witness some signs of revival. Share prices of companies such as Maruti Suzuki Limited, Tata Motors and Mahindra & Mahindra surged with better than expected August performance.  

The surge has been led by smaller cars and entry models as more people are looking at personal safety in the times of COVID-19, which has restricted public transport movement including shared car facilities provided by cab aggregators. Rural demand was also strong with farmers yielding good Kharif crops, resulting in increased tractor sales according to industry experts. 

Domestic sales of Maruti Suzuki India grew 20% year-on-year in August 2020, while the overall sales grew by 17%. The company reported total sales of 124,624 units in August 2020, a growth of 15.3% over July 2020.   

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Tata Motors also recorded 21.6% growth in domestic sales of 35,420 units driven by strong growth of 154% in passenger vehicle segment. Domestic commercial vehicle segment continued to remain under pressure with the segment declining 28%. Tata Motors Limited sales in the domestic and international market for August 20 stood at 36,472 vehicles, compared to 32,166 units during August 2019, grew 13.3%. 

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Mahindra & Mahindra registered 16% de-growth in sales in the month of August dragged down 94% drop in the three-wheeler segment. Overall automotive sales (Domestic+Exports) stood at 30,426 vehicles in August 2020, compared to 36,085 vehicles during August 2019. The company’s passenger vehicle and commercial vehicle segment witnessed a positive growth. In the passenger vehicle segment (which includes UVs, Cars and Vans), Mahindra sold 13,651 vehicles in August 2020, compared to 13,507 vehicles in August 2019, registering a marginal growth of 1%. In the commercial vehicle segment, the company sold 15,299 vehicles in August 2020, as against 14,684 vehicles in August 2019, a growth of 4%.   

Veejay Nakra, chief executive officer, Automotive Division, M&M Ltd said, “At Mahindra, we continue to see good recovery in demand both for SUVs and Pick-ups in the Small Commercial Vehicles segment. For the month of August, we have registered growth in both SUVs and Pick-ups. We have been able to meet the uplift in demand by managing the supply chain challenges and going forward will continue to keep our focus on it.”

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Honda Cars India Ltd (HCIL), leading manufacturer of premium cars in India, reported a sales decline of 9.4% in August 2020 selling 7,509 units as compared to 8,291 units which were sold in the same month last year. In July 2020, Honda recorded a sales decline of 42.6% selling 5,863 units, while in June 2020 its sales went down by 86.44% selling 1,398 units. However, Honda's month-on-month sales in July 2020 was up by 28.07%. The export stood at 450 units in August.

Rajesh Goel, Sr. vice president and director, marketing and sales, Honda Cars India Ltd said, “A quarter into the unlock phase, we are progressing as per our plan, both in terms of supply and demand registering a sequential growth of 39% over July’20. As we ramp up our daily production to 100% pre-COVID level this month, we are optimistic about the upcoming festive period and expect demand to improve further. However, considering that COVID-19 cases are constantly on the rise, we need to continuously monitor overall buying sentiment and its impact on auto sales going forward.”

In terms of two-wheelers, several companies focused on new launches to lure customers. Two-wheelers that arrived this month are -- Honda Hornet 2.0, Triumph Street Triple R, Ducati Panigale V2, Kawasaki Versys 650, Vulcan S and TVS Jupiter ZX Disc. Two-wheeler manufacturers in the country have reasons to rejoice, the August sales figures have been encouraging with many of the biggies registering sequential double-digit growth. Even companies like Hero MotoCorp and Bajaj Auto surpassed the year-ago period figures in terms of volumes. Rest of the players, too, came close to the volumes of the pre-Covid times on a year-on-year (Y-o-Y) basis, given the fact that the August 2019 volume base was low due to slowdown. The auto companies are optimistic that sales will continue the upward trajectory with favourable factors such as the upcoming festive season, increasing consumer confidence and continued government policy support.

The largest manufacturer of motorcycles and scooters, Hero MotoCorp, has continued to lead the revival of the automotive sector. The company reported 8.52% sales growth year-on-year to 5,68,674 units of motorcycles and scooters in the domestic market in August. Sequentially, the company witnessed 12% growth over July.

Bajaj Auto reported 17% sequential sales growth in August, 2020, with domestic sales being at 1,78, 220 units against 1,52, 474 units in July. The Pune-based company had also surpassed the Y-o-Y period volumes by 3%. It had registered sales of 1,73,024 units in August 2019. 

Royal Enfield reported sales of 47,571 units in August compared to 37,925 units in July, thereby registering growth of 25% sequentially. The iconic bike maker had registered sale of 48,752 units in August 2019. 

Honda Motorcycle & Scooter India’s (HMSI’s) sales stood at 4,43,969 units, including 4,28,231 domestic sales and 15,738 exports in August. Honda’s domestic sales breached 4-lakh mark for the first time in FY21 and registered 1% Y-o-Y growth. Honda’s sales grew by a significant 38% in August compared to July.

Yadvinder Singh Guleria, Director – sales and marketing, Honda Motorcycle and Scooter India Pvt Ltd, said, “Our line-up of 14 models including our latest motorcycle Hornet 2.0 will excite new customers. More than 50% of the total sales are thanks to the Activa – India’s best-selling scooter. The move is part of HMSI’s portfolio expansion to cater to a wide range of customers. Honda CB Hornet 160R’s run came to an end when BS-VI was mandated from April 1, 2020. While HMSI has a dominant city presence, owing to its every popular Activa range of scooters, the brand is reviewing rural demand that could be met by a motorcycle that sits below its entry level CD 110. In close competition with Hero, a meaningful entry in the mass market bike segment would boost HMSI sales.”

Suzuki Motorcycle India (SMIPL), the two-wheeler subsidiary of Suzuki Motor Corporation, Japan, made a substantial comeback in August,2020, by recording sales of 57,909 units. SMIPL registered sequential growth of more than 46% in August sales compared to July, due to enhanced production levels. The company sold 53,142 units in the domestic market, compared to 31,421 in July amid the COVID-19 outbreak.

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