November 5, 2020

Indian Auto OEMs Clock Strong Volumes in October 2020


Ridhish Talwar

Automotive manufacturers in India have seen a sequential month on month growth in volumes from May 2020 to October 2020. Most market leaders (with the exception of commercial vehicle players) have even witnessed a year on year growth in factory dispatch numbers, specifically August 2020 onwards. The year on year growth may not be surprising given the low base formed in 2019, along with demand getting pushed back due to the lockdown in March and slow opening up of the economy thereafter.

broken image

Maruti, the 4W category leader, grew their domestic car volumes the fastest at 18% from 139,121 in October last year to 163,656 in October 2020. The growth was robust across categories, except the fast growing entry level vehicles like the Alto and S-Presso, which did not grow last month. Toyota also finally joined the party, showing first signs of year on year growth in volumes. All the other OEMs also witnessed growth in domestic volumes on both month on month and year on year basis.

broken image

Hero MotoCorp recorded its highest ever production volumes in any single month ever with over 8 lakh units dispatched in October 2020. This was a 35% growth over the same period last year and their press release stated that, “A positive turnaround in customer sentiments – particularly for motorcycles across markets, continued government policy support and a credible resumption of supply chain, logistics and business operations have enabled the company to achieve record numbers during the auspicious festive period.”.

Other major players (with the exception of Royal Enfield) also saw a jump up in volumes relative to the same period last year. Bajaj Auto claimed the highest ever export volumes at 201,659 units and total production at 470,290 units. Their Pulsar brand of motorcycles also saw record sales of over 170,000 units.

broken image

The tractor segment also remained robust with growth in volumes for both Escorts and Mahindra on a month on month and year on year basis. This segment is expected to continue to show strong volumes in the coming month.

broken image

Commercial vehicle sales continue to lag relative to the other segments of the automotive industry. The domestic three wheeler segment is still struggling with volumes down by -65% and -56% for Bajaj and Mahindra respectively. Light commercial vehicles have led the recovery for the CV segment and now the M&HCV truck segment also shows signs of catching up with Ashok Leyland showing a 12.63% growth in volumes relative to October 2019. The M&HCV bus segment is still lagging with volumes down by 90% for players like Ashok Leyland.

broken image

In 2019, October was the month of festivals with Dussehra, Durga Puja, Dhanteras and Diwali, all falling within the month. Hence, the growth in volumes in October 2020 is quite encouraging. But we must remember that retail sales data is not as encouraging as the factory dispatch number across categories and hence, there has been an increase in inventory levels at the dealership. 2W dealers are reporting inventory of almost 2 months and the 4W sellers at upto 1.5 months.

With Dhanteras and Diwali yet to come in November, hopefully the momentum should sustain till the end of the year at least, but what happens thereafter is the big question.