Festivals bring record wholesale trade to Indian auto makers

05, Nov. 2020

Tata Motors’ Nexon EV model on display at the Auto Expo 2020 at Greater Noida in the northern Indian state of Uttar Pradesh on Feb. 6, 2020. The carmaker registered domestic sales of 49,669 units in October 2020, a growth of 27 percent over last year (NNA)
Tata Motors’ Nexon EV model on display at the Auto Expo 2020 at Greater Noida in the northern Indian state of Uttar Pradesh on Feb. 6, 2020. The carmaker registered domestic sales of 49,669 units in October 2020, a growth of 27 percent over last year (NNA)

By Atul Ranjan

NEW DELHI, NNA - The ongoing festive season in India is bringing much-needed cheer to the crisis-hit auto industry as both the passenger vehicle (PV) and two-wheeler segments have been on track to achieve double-digit wholesale growth in October.

Several leading automakers have reported record year-on-year dispatches to dealers capitalizing on the nationwide holiday mood, consumer optimism in rural areas and the pressing need to own personal vehicles as people avoid public transport amid the COVID-19 pandemic.

Car makers Maruti Suzuki, Hyundai, Tata, Honda, Toyota and Mahindra have all reported positive results as consumers set their eyes on new models and utility vehicles.

Analysts said PVs and two-wheelers are expected to grow 16-17 percent year-on-year after compiling October figures reported by manufacturers.

The PV segment is also set to hit a double-digit growth month-on-month. The wholesale of two-wheelers is poised to grow by a single-digit month-on-month.

A senior auto analyst with a brokerage firm told NNA that the PV sales are expected to climb 22 percent from September to over 333,859 units in October. Two-wheeler sales will move up 7 percent from September to over 1985,690 units in October, according to his estimates.

The month-long festive season stretching from Oct. 15 to Nov. 15 covers Navratri and Dussehra festivals as well as the widely celebrated Diwali when people traditionally spend the most on a slew of consumer products, from clothes to big-ticket items like bikes and cars.

The country’s largest passenger carmaker Maruti Suzuki India Ltd., a subsidiary of Japan's Suzuki Motor Corp., has already reported strong sales jump of 19.8 percent year-on-year to hit 172,862 units in the domestic market in October.

The second-largest carmaker Hyundai Motor India Ltd., a subsidiary of South Korea’s Hyundai Motor Co., posted its “highest ever” domestic volume of 56,605 units, up 13.2 percent from October last year.

India’s Tata Motors Ltd. registered a robust growth of 27 percent with delivery of 49,669 cars including its SUVs and MPVs to dealers last month as interest in such cars continued to grow.

Even a new entrant like Kia Motors India, a wholly-owned subsidiary of South Korea’s Kia Motors Corp., had reported positive sales of over 21,000 units.

The two-wheeler market also witnessed a buoyancy with the largest player, Hero MotoCorp Ltd., achieving an impressive 35 percent growth in October. It sold 806,848 motorcycles and scooters, its highest-ever sales in any single month, the company reported.

The country’s second-largest two-wheeler maker Honda Motorcycle and Scooter India Pvt. Ltd., a subsidiary of Japan's Honda Motor Co., reported a modest 2 percent growth, but still managed to sell 527,180 units last month.

Another two-wheeler producer Suzuki Motorcycle India Pvt. Ltd., a unit of Japan's Suzuki Motor Corp., recorded a 3 percent growth, pushing sales up to 76,865 units and exceeding its festive performance last year.

“We have surpassed our sales volume of last October. This is quite significant. In 2019, the predominant festive season from Navratri to Diwali was concentrated in the month of October unlike this year when they are spread over the latter half of October and going up to the earlier half of November,” said Devashish Handa, vice president of Suzuki Motorcycle India, in a statement released on Monday.

This has given more optimism to the industry as it has been looking for a recovery after the lockdown, he added.

Echoing a similar sentiment, Tarun Garg, director for sales, marketing and service at Hyundai Motor India, said the October performance has set a positive tone for the overall business environment in the country.

Pleased with the positive demand, Kookhyun Shim, managing director and CEO at Kia Motors India, said, “It is good to see the numbers rebounding with the market slowly coming back on track as the customers are going ahead with their long-held purchases.”

Indian auto industry had already been reeling under severe slowdown for many months, and the continuing pandemic only added to their woes. Leading automakers suffered negative growths during the first-half (April-September) of the current fiscal year ending March 2021, according to the Society of Indian Automobile Manufacturers.

On the festive surge, Suman Chowdhury, chief analytical officer of Acuité Ratings & Research, said, “We continue to believe that higher demand expectations in the ongoing festive season, greater need to own personal vehicles and higher rural incomes are driving growth in the domestic automotive sector at this point in time.”

Bigger farm harvests, good prices for produce and a normal monsoon season with adequate rainfall are rewarding farmers with better incomes.

Chowdhury noted that the higher demand for compact and utility vehicles helped boost Maruti Suzuki and Hyundai sales.

“Maruti Suzuki domestic volumes have grown by 19.8 percent year-on-year in October 2020 with 26.6 percent and 9.9 percent increase, respectively, in the compact car and the UV segment. The current strength in domestic passenger vehicle demand is also reflected in the 13.2 percent volume growth reported by Hyundai Motor,” he said.

Shashank Srivastava, executive director for marketing and sales at Maruti Suzuki, said the growing demand for new, entry-level small and compact cars shows more people want their own vehicles to stay safe in the pandemic which has infected more than eight million people in the country.

“There has been a shift towards smaller cars, for example, the share of hatchback cars in our portfolio has gone up by 4.4 percent to around 62 percent during the first-half (April-September) compared to the same period last year,” he said during an online conference with reporters last Friday.

“In the just-concluded Q2 (July-September), the share stood at 62.8 percent, up 6.5 percent over the same period last year,” he added.

R.C. Bhargava, chairman of Maruti Suzuki, said the positive trend is likely to continue till December, but it would be difficult to tell how the demand will pan out in the new year.

Vinkesh Gulati, president of the Federation of Automobile Dealers Associations (FADA), believes dealers will continue to face challenges even during this festive shopping season.

“While official numbers are still awaited, ground reality isn't that buoyant for retail sales,” he said in a TV interview, adding that he has not yet seen the return of normal consumption.