Auto Sales August 2021: Passenger Vehicles, Two Wheelers, Commercial Vehicles & Tractors

It’s the start of the new month and the auto industry is ready with their August sales numbers. Let’s find out which company fared how in which segment. 

Four Wheeler Cars:

Passenger vehicle (PV) numbers were mostly in line with estimates. In total, the sales grew 8% YoY in August 2021 but declined 20% MoM. 

The factors affecting the numbers were:

• Strong demand helped in good growth but was restricted largely by the semiconductor shortage. 
• The industry is also experiencing commodity price inflation impact. However, the inflation is expected to max out in the 2nd half of FY22.
• With the decrease in production at major OEMs due to the semiconductor shortage, Sep '21 numbers could see a significant decline despite strong demand and new launches.

Maruti Suzuki:

• Chip shortage: It is faring relatively better as it is able to adjust its production by manufacturing cars with a lower intensity of semiconductors
• Maruti has lost 850 bps of market share YoY. This was caused by stagnant product portfolio & declining market share in utility vehicles.
• Recently, the company said that it will cut September production by 60% due to shortage in supply of semiconductors. This is the second consecutive monthly cut seen by the company due to the chip shortage.
• In the previous quarter, the company saw a 3.5pp increase in commodity price QoQ. It expects a further impact in Q2 and expects the price to stabilize thereafter, according to its management commentary post Q1 earnings. 

Tata Motors: 

• Tata Motors, like everyone else, is also facing the heat of chip shortage. Their solution is to reduce the amount of chips used per car and acquiring chips from the open market. They are also trying to build inventory for the festive season.
• EV sales crossed a crucial threshold of 1000 units this month with Nexon EV volumes standing at 1022 units. At the end of the month, Tata also launched Tigor EV starting at Rs 11.99 lakhs. 
• Tata has made some serious gains in market shares due to new product launches in the SUV segments. The company is also going to launch under 10 lakh utility vehicles “Punch” in the festive season.
• The demand for commercial vehicles has shown recovery post-June 2021. The Passenger Vehicle demand is also recovering well, according to the management.

Mahindra & Mahindra

• M&M’s demand across its product portfolio continues to remain strong with Thar, XUV 300 and our recently launched Bolero Neo and our Bolero Pik-up range clocking in impressive booking numbers. 
• Growth momentum in exports continued with the sale of 3,180 vehicles, registering an increase of 172%. 
• However, M&M said that the supply of semiconductors continues to be a global issue for the auto industry and has been a major area of focus for us”

Two Wheelers:

Two wheeler sales were below estimates in August 2021, down 10% YoY (+2% MoM).

Inventory stands at around 45–60 days, and dealers expect good retails during the upcoming festival season. Rising fuel costs and cost of ownership are acting as headwinds for domestic demand. However, export demand remains strong (+36% YoY; +5% MoM).

• The gap in volumes in the domestic market between Honda and Hero MotoCorp has reduced drastically. 
• Overall, the whole two wheeler industry is seeing a downward trend due to rising fuel costs and vehicle prices. Budget vehicle makers like Hero are particularly hit hard due to high price elasticity of demand in that segment. 
• Startups like Ola Electric, Ather Energy, Simple EV etc which launched electric two wheeler are seeing major demand for their models.

Commercial Vehicles:

Commercial vehicle volumes were in-line with expectation; up 61% YoY, 18% MoM.

• Demand for commercial vehicles is seeing a major recovery. With a recovery in economic activity because of a pick up in construction and manufacturing activity, the CV segment was able to report higher MoM numbers. 

Tractors:

Tractor volumes were below estimates; down 15% YoY (down 20% MoM): 

The numbers were down due to seasonality & high base of last year.

The upcoming festival season, coupled with kharif sowing, which is almost at a similar level as the previous year, may aid demand in the coming months. 

INDmoney Analysis

• For most players in the two-wheeler industry, the sales have softened from record high levels witnessed in October-20. Rising fuel costs and cost of ownership are acting as the major headwinds in this category. 
• In the four-wheeler space, semiconductor shortages seem to be the major headwind, with most of the listed players including Maruti Suzuki, Tata Motors and M&M reporting decline in month-on-month sales. 
• A welcome relief is the green shoots or recovery witnessed in the Commercial vehicles segment. With a recovery in economic activity because of a pick up in construction and manufacturing activity, the segment did well in the month. 
• On the positive side, the auto companies are looking forward to the festive season. Further, with several indicators such as the decent monsoon, and the several government schemes in the social sector, the future appears positive for two-wheelers and the four-wheelers.  
• However, resurgence of Covid infections in countries such as Malaysia and Indonesia and consequent lockdowns has led to a delay in delivery of semiconductors and other key parts to automakers in India. Hence, these could derail the recovery.