Auto industry update Sep-20!

Last updated: 05 Oct, 2020 | 03:38 pm

Auto industry update Sep-20!

Two-wheeler sales beat Covid-19 blues

  • Continuing the path of recovery from the zero sales in April, Indian two-wheeler manufacturers have now surpassed pre-Covid level sales in September. Most of the leading players have registered strong domestic growth, even as they beefed up their dealer inventories in preparation for the upcoming festive season of Navratri and Diwali. 
  • Three of the top six manufacturers, which control 96% of the domestic market, reported an increase in demand in Sep-20, buoyed by the resumption of economic activities.
  • “Leading the path of rapid recovery, Hero MotoCorp sold more than 7 lakh units, its highest monthly sales in CY2020.”
  • Continuing to strengthen its market leadership, Hero MotoCorp registered a 16.9% YoY rise in sales to 715,718 units in September 2020. Hero MotoCorp remains India’s largest two-wheeler manufacturer with a market share of ~40%. 
  • Sales for Bajaj Auto have also recovered faster than the industry, thanks to pent-up demand. Bajaj Auto registered 24% on-year growth in Sep-20 sales to 2,19,500 units, as compared to 1,77,348  units a year ago. The company has reported its highest ever exports in the month.

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 four months.
  • Passenger car sales have seen a rapid recovery in September-20, led by India’s largest car manufacturer Maruti Suzuki recording 30.80% on-year rise in total sales to 1.60 lakh vehicles. 
  • Tata Motors and Hyundai 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, shift to personal mobility, inventory building for the festive season and several new car launches helped the carmakers to post robust YoY growth in Sep-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 have improved month-on-month, Sep-20 witnessed a single digit decline as compared to the same period last year.
  • While the sales in Sep-20 have improved over the previous months, this stress in the commercial vehicle sector still remains a worry. 
  • Going forward, light commercial vehicles (LCV) are expected to make better sales than heavy & medium commercial vehicles (M&HCV) as infra and construction projects remain muted.

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 Sep-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. 
  • Apart from two-wheelers, Passenger Vehicles have also seen a robust growth in September-20, aided by improving sentiment, favourable monsoon, higher agri output, and new model launches.
  • 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 and trucks used for transporting argi materials
  • Commercial vehicles and three-wheelers remain the worst affected and are likely to remain under pressure in the near-medium term.
  • We continue to remain positive on two-wheeler stocks Hero Motocorp and Bajaj Auto.

Consensus Recommendations

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