India's oversupplied automotive still gets festive boost in October

13, Nov. 2020

Photo caption: A file photo of Maruti Suzuki India showroom in New Delhi. While the Indian subsidiary of Japan's Suzuki Motor Corp. had reported a “strong” wholesale in October, its actual retail sale was much lower, suggesting an oversupply. (Photo courtesy of Maruti Suzuki)
Photo caption: A file photo of Maruti Suzuki India showroom in New Delhi. While the Indian subsidiary of Japan's Suzuki Motor Corp. had reported a “strong” wholesale in October, its actual retail sale was much lower, suggesting an oversupply. (Photo courtesy of Maruti Suzuki)

By Atul Ranjan

NEW DELHI, NNA - India’s automotive retail, which grew slowly since the easing of pandemic lockdowns, achieved its highest sales after a festive surge in October.

The Federation of Automobile Dealers Associations (FADA) reported that a total of 1,413,549 units of vehicles including two-wheelers were sold in October, up 5.1 percent from September.

The shopping rush saw 249,860 passenger vehicles and 1,041,682 two-wheelers snapped up by eager buyers celebrating the Navratri and Dussehra festivals, and the third and largest holiday of Diwali happening this weekend.

Retail sales have grown in consecutive months since June when lockdown restrictions were eased in more areas. Sales jumped around 13 percent in September, with 1,344,866 units sold across all categories.

Rajesh Menon, director general of Society of Indian Automobile Manufacturers (SIAM), said, “There were marked improvements witnessed across certain segments due to very good festive demand.”

The surge was mainly driven by compact and utility vehicles, which reflect people wanting to use their own vehicles instead of public transport to feel secure amid the coronavirus pandemic, he said.

Despite growing retail sales over the past months, they still pale in comparison with last year's performance. Also, October retail sales did not reach the positive wholesale figures reported by vehicle makers earlier.

“October continues to see positive momentum on a monthly basis, but on a yearly basis, the negative slide continues to worsen,” FADA president Vinkesh Gulati also noted.

FADA has voiced concerns over inventory build-up with the addition of unsold vehicles after overzealous makers rushed out huge numbers in anticipation of festive buying. The association has appealed to automakers to monitor vehicle stocks stuck with dealers and, if necessary, “curb production accordingly" in the coming months.

The association also warned of dismal sales after the end of the holiday season in mid-November.

October data shows PV and two-wheeler retail sales had fallen 8.8 percent and 26.8 percent respectively year-on-year. In contrast, SIAM wholesale numbers show the two segments rising 14.2 percent and 16.9 percent accordingly.

The country’s largest passenger carmaker Maruti Suzuki India Ltd., a subsidiary of Japan's Suzuki Motor Corp., had reported “strong” wholesales soaring by 19.8 percent year-on-year to 172,862 units in the domestic market in October. But its smaller retail sales of 124,261 units that month suggest an oversupply.

Likewise, the second-largest carmaker Hyundai Motor India Ltd., a subsidiary of South Korea’s Hyundai Motor Co., had posted its “highest-ever” domestic wholesale volume of 56,605 units in October, up 13.2 percent from last year. But retail figures added up to 42,757 units only.

Also riding into the less rosy reality is two-wheeler market leader Hero MotoCorp Ltd., which had dispatched 806,848 motorcycles and scooters in October. Its dealers subsequently sold 333,563 units only, a far cry from wholesale figures.

While dealers, especially those selling two-wheelers, are saddled with more unsold stocks, some makers are confident that the positive festive demand would continue till mid-November and reduce inventory.

Pawan Goenka, managing director of Mahindra & Mahindra Ltd., an Indian multinational vehicle manufacturer, said continuous festive demand will help bring down stock levels.

“Till mid-November, demand will be very high due to the festivals of Dhanteras and Diwali. After that, everyone will be low on inventory,” he said reassuringly during a virtual conference on Tuesday.

Analysts at ratings firm CARE Ratings Ltd. said festive figures are expected to be lower in November as the holiday dates have been spread over October and November, unlike last year when they fell within the one month of October.

However, they believe dealers may sustain sales till January next year.

“The wedding season demand has started and is expected to continue up to January 2021,” the firm explained in a report on Wednesday.

However, it expects both wholesale and retail to lose their momentum from February next year.