Automobile, FMCG sectors in India see signs of revival after lockdown eased

03, Aug. 2020

Photo by Milind Shah on Unsplash
Photo by Milind Shah on Unsplash

By Atul Ranjan

NEW DELHI, NNA - Sectors such as automobile and fast-moving consumer goods (FMCG) in India have been seeing some hopeful signs of revival since June 1 following the phased reopening of the economy after more than two months of lockdown to tackle the coronavirus pandemic.

After suffering zero domestic sales in April for the first time ever, automakers in India have reported month-on-month growths since May. Similarly, FMCG sales in both rural and urban areas have been rising.

According to India’s Federation of Automobile Dealers Associations (FADA), the overall automobile retail sales in June rose to 984,395 units, up from 202,697 units in May. It expects July to do “mostly” better than June when all figures are in.

The significant increase in wholesale numbers in July reported last week by India’s top automakers is a clear indication that retail sales are likely to continue their ascent.

The country’s largest passenger car maker Maruti Suzuki India Ltd. saw a jump of over 88 percent to 108,064 units in July. The subsidiary of Japan's Suzuki Motor Corp. commands more than 50 percent of the market in the passenger vehicle category.

The second largest carmaker Hyundai Motor India Ltd., a unit of South Korea's Hyundai Motor Co., reported a 54 percent increase in wholesale sales or 41,300 units sold in July.

Better performances were also seen in the two-wheeler category.

Two market leaders Hero MotoCorp. Ltd. and Honda Motorcycle & Scooter India Pvt. Ltd., reported sales improving by around 14 percent and 53 percent respectively in July.

“The factory dispatch volumes of the bellwether of Indian automobile industry, Maruti Suzuki, are encouraging with only a slight contraction of 1.1 percent in July 2020 as compared to the previous July and a sharp 88.2 percent pickup over June. Similar trend is seen for Hyundai India,” Suman Chowdhury, chief analytical officer of Acuité Ratings & Research Ltd., said in a statement on Saturday.

“While the growth figures are partly a play of the base effect, there is a significant undercurrent of recovery in the domestic automobile sector driven by the increased need for personal mobility, particularly given the increased risk as well as continuing unavailability of public transportation mechanisms in the wake of Covid-19,” he added.

Chowdhury expects two-wheeler and tractor sales to perform better in July following a healthy growth in the agricultural sector which was not hit hard in the economic fallout of the pandemic.

Meanwhile, market research firm Nielsen Holdings plc. noted that FMCG sales in rural India grew 12 percent in June, reversing a total decline of 23 percent in April and May.

Sales in urban areas dropped by just 4 percent in June compared to a combined 27 percent fall in the two preceding months which were hit by massive disruptions in production and supply chain.

“The revival was aided by opening up of retail stores and consumers looking at resuming normal consumption levels across categories,” Nielsen said in its July 30 report.

India, which imposed a nationwide lockdown from March 25, had been gradually reopening its economy since June 1.

“After witnessing slower growth compared to urban in Q1’20 (Jan-March), rural markets led the industry revival in June with a double digit (12 percent) growth versus June of 2019,” said Nielsen.

India has the third highest number of coronavirus cases in the world. However, the government has largely eased movement restrictions to help revive the economy, while making moves to increase testing.