Auto industry update

Last updated: 08 Sep, 2020 | 02:04 pm

Auto industry update

Two-wheeler industry beats Covid blues

  • Two-wheeler industry sales have now recovered to pre-Covid levels, aided by easing of restrictions in the month of August
  • Three of the top six manufacturers, which control 96% of the domestic market, reported an increase in demand in the Month of August, buoyed by resumption of economic activities
  • Leading the path of rapid recovery, Hero MotoCorp’s sales have now surpassed pre-COVID levels with robust volumes of 5.84 lakh in August, registering a YoY growth of 7.5%. Hero Motocorp remains the largest two-wheeler manufacturer in India with more than 44% market share. Bajaj Auto, the second largest two-wheeler manufacturer has reached 91% of pre-Covid level sales in August 
  • “Nearly 1.5 million motorcycles, scooters and mopeds were sold in Aug-20 -- an increase of 3% as compared to 1.45 million in Aug-19, indicating rapid recovery in the two-wheeler industry, led by Hero Motocorp and Bajaj Auto”
  • Sales for Bajaj Auto have also recovered faster than the industry, thanks to pent-up demand. The chart below shows the sales of Bajaj Auto and HeroMotocorp since January-20

Four-wheeler car sales

  • After a complete washout in the month of April, the passenger vehicle segment has reported a steady recovery in the last three months
  • Passenger car sales have seen a rapid recovery in August-20, led by India’s largest car manufacturer Maruti Suzuki recording 20.2% on-year rise in domestic sales to 1.13 lakh vehicles.
  • Tata Motors and M&M have also shown robust growth in the month, aided by easing of lockdowns in various states. The table below shows data on domestic passenger vehicle sales for various manufacturers
  • Demand from rural areas continues to remain strong. On the back of good monsoons, increased government support via crop prices and MNREGA funding.“Pent up demand,  inventory building for the festive season and several new car launches helped the carmakers to post robust YoY growth in August-20.”

Commercial vehicle sales lag

  • Commercial vehicles and three-wheelers remain the worst affected in this pandemic. Given the fact that consumers are unwilling to use public transportation to practise social distancing, this segment could remain under pressure in the near-medium term.
  • While the sales in August 2020 have improved over the previous months, this stress in the commercial vehicle sector still remains a worry.

Tractors

Tractors remains another bright spot in the auto industry, with players such as Escorts and M&M seeing record-high sales in the month of August-20. “Record tractor sales in the month was aided by an increase in Kharif sowing area, thereby indicating a bumper harvest, bountiful monsoon, good rural cash flows and base effect.”

INDmoney Analysis

  • The timely arrival of the south-west monsoon, combined benefits of a record Rabi crop, Government support for Agri initiatives and very good progress in the sowing of the Kharif crop have led to positive sentiments in the rural areas. This has led to a rapid recovery in two-wheeler and tractor sales
  • These factors along with the upcoming festive season are expected to keep the momentum going over the next few months for two-wheelers as well as rural-focussed vehicles such as tractors, which are used in agriculture activities
  • Commercial vehicles and three-wheelers remain the worst affected and are likely to remain under pressure in the near-medium term.

Consensus Recommendations

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