AUTO SECTOR – BREATHING EASY AGAIN

Nitin told his parents very clearly, “No going anywhere in public transport any more. Not even Ola and Uber. I am booking a car and henceforth that’s the only safe way to travel.”

This is just one household but going by the sales numbers of car companies for month of June, looks like this is the thinking of a majority of people across India. Those who had never thought of a car are now looking at it as a necessity.

Its not repressed wants but the need to protect oneself and loved ones from exposure of any kind of infection through public transport  which is the prime reason for the jump in sales, mainly June v/s May (MoM). A YoY comparison makes no sense as the circumstances are drastically different which is why the YoY numbers look very poor. 2019 was a normal year while 2020 is extraordinary.

Maruti sales, MoM, showed a huge 200% jump at 57,428 units sold. The mini and compact segment together accounted for sale of 37,154 cars or 72% of total June sales.  

Hyundai reported a sales of 26,820 units for the month of June v/s 12,583 units (MoM).

In the two-wheeler segment, Hero MotoCorp reported four-fold jump in dispatches when compared to May this year. Bajaj Auto reported a 126% MoM jump in its sales and TVS Motor showed a 32% jump. Sales of Royal Enfield also almost doubled in June over May.

Mahindra &Mahindra reported a more than doubling of sales for June, led mainly by rural demand for Bolero, Scorpio and Pik-Up. Toyota Kirloslar June sales jumped up 137% and that of Honda Cars by over 250%.

Ashok Leyland reported recovery in monthly sales. In June, the company’s total vehicle sales stood at 2,394 units against 1,420 units in May. VE Commercial Vehicles Limited, a subsidiary of Eicher Motors sold 1,358 vehicles in June v/s 686 vehicles in May.

Inventory with dealers has also come down or become normal in most cases and was around one-week during June. Capacity utlisations in June was around 70-90% of pre-Covid levels.

Thus all over, across all auto companies, June has been a good month and they expect the same trend to continue into July and August too. YoY, we will continue to see a fall of 50-80%; infact analysts tracking the sector say that the YoY barometer for comparison will start making sense only by Jan 2021 or Q3FY21. But once again, if the corona continues to peak like the way it is currently, momentum is likely to get impacted as many cities have put restrictions on movements. While rural demand could show a sharp up tick, urban India might lag behind.

Maybe, like all of us, the auto sector’s complete revival, almost a ‘V’ shaped one, depends on the discovery of the vaccine.