April 19, 2024

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Automotive to Us

Auto sales steady but dealers wary of hurdles ahead

Passenger vehicle and two-wheeler sales in India rose for the fifth straight month in December as automakers moved to replenish dealer inventory after better-than-expected retail sales during the festive months of October and November.

Sales also received a boost from the low base of the corresponding month last year when companies witnessed a contraction in demand.

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Passenger vehicle sales grew 13.5 % from a year earlier in December to 252,998 units, showed data released by the Society of Indian Automobile Manufacturers (Siam) on Thursday.

Growing demand for affordable hatchbacks and compact sport-utility vehicles, or SUVs, in rural, semi-urban and some parts of urban India helped drive sales.

Note, automobile sales in India are counted as factory dispatches and not retail sales.

Utility vehicle sales grew 19.75% from a year earlier in December to 94,787 units, indicating a sustained rise in urban demand. Passenger car sales grew at a slower 8.3% to 146,864 units.

In the two-wheeler segment, scooter sales rose 5.59% from a year earlier in December to 323,696 units though motorcycles posted a modest 6.6% rise to 744,237 units as demand for entry-level motorcycles softened in rural and semi-urban markets. Overall, two-wheeler sales grew by 7.4% to 1.12 million units.

Despite a steady revival in sales from September, the auto industry remains cautious with volumes during April to December 2020 falling to a near-decade low due a complete washout in the June quarter when the country faced a strict lockdown.

Supply chain bottlenecks and rising prices of raw material such as steel and copper may also impact the recovery process in the coming months.

Passenger vehicle sales fell 16% in April-December 2020 to 1.78 million units—the lowest level since FY11—while the same for two-wheelers dropped 22.6% to 10.7 million units—the lowest since FY14. Commercial vehicle sales plunged 37.7% to 358,203 units—a level last seen in FY11—due to a slowdown in economic activity and new load-carrying norms.

Kenichi Ayukawa, president, Siam, said despite the positive momentum in sales, there is a high level of uncertainty due to shortage of parts such as semiconductors and commodities such as steel, which makes it difficult to predict the demand scenario.

“If we look just at the third-quarter numbers, it will be quite misleading. In the nine months period to December, passenger vehicle and commercial vehicle sales were at a decadal low while the same for two-wheelers were at a seven-year low,” Ayukawa said, adding that the recent steps by the government such as the production- linked incentive (PLI) scheme, and the prevailing low interest rates “will definitely help the industry going forward”.

Despite rising covid cases and a contraction in economic growth, passenger vehicle manufacturers recorded double-digit growth in sales in the festive period after two years, reducing their dealer stocks. Hence, most offered lower-than-normal discounts in December to liquidate year-end inventory.

“Demand after the festival season has been good. Almost all OEMs (original equipment manufacturers) witnessed good sales during November and December,” Ayukawa said.

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