MUMBAI: The market expects automobile sales to have recovered further in September.
In the run-up to the festival season, original equipment manufacturers are restocking inventory at the dealers’ end. Channel checks show that among vehicle categories, inventory build-up is relatively better for two wheelers, passenger vehicles, and tractors. On the other hand, commercial vehicles and three-wheelers are likely to remain the laggards.
“Our interaction with leading industry channel partners indicates two-wheeler inventory has reached 30–45 days on the expectation that sales momentum would continue into the festive season and passenger vehicles inventory would sustain at a comfortable level of 20–30 days. Inquiries were encouraging and better than last year,” Motilal Oswal Securities Ltd said in a report on 30 September.
The broking house expects wholesales in September to grow on a year-on-year basis for all segments barring medium and heavy commercial vehicles (M&HCV). It said, low starting inventory, a low base, and normalising production, would support growth. Two wheelers’ wholesale volume is seen growing at 10% y-o-y and 23% y-o-y for passenger vehicles, added the report.
As per Nirmal Bang Securities Pvt. Ltd, discounts were offered in some markets to push sales ahead of the festive season where it is considered inauspicious to buy vehicles in certain periods in the year. Higher wholesale demand from festival-centric southern markets helped offset lower retail sales in the northern and western markets, it said in a report on 30 September.
Meanwhile, increased preference for personal mobility would aid growth in retail sales of two-wheelers and passenger vehicles. For now, wholesale volumes growth would save the day for the automobile sector. However, the trajectory of retail sales after the festive season is key to get a clearer picture of demand.
“YoY trends could be a bit subdued in the next 2-3 weeks given the timing of festivals, and the pick-up in retail demand from mid-October would be key,” said analyst at Jefferies India.
Among companies, analysts expect Maruti Suzuki Ltd and Hero Moto Corp to post double-digit volume growth in September. Maruti’s high concentration towards entry-level cars and large distribution network gives it an edge over peers. Similarly, strong demand for Hero’s entry-level bikes would boost its sales, analysts said. Normal rains and good rabi harvest are among the factors which would keep demand for tractors upbeat. This bodes well for Mahindra & Mahindra and Escorts Ltd, they said.
As for other segments, the demand for commercial vehicles is likely to remain muted due to excess capacity with transporters. The pain for three-wheeler sales is expected to continue. Channel checks show falling incomes of drivers has made financers cautious of disbursing new loans to them.