Automakers see growth in festive sales but rising covid cases could play spoiler3 min read . Updated: 15 Sep 2020, 10:24 PM IST
- In the last two years vehicle sales during Navratri and Diwali remained subdued due to economic slowdown
- Vehicle manufacturers have been witnessing continuous decline in sales from the second half of FY19 due to economic slowdown
NEW DELHI : Cheered by the gradual uptick in retail sales from June, India’s automakers are expecting passenger vehicles and two-wheelers sales to further improve during the festive season but the rising cases of covid-19 pose a serious challenge, said senior executives of automobile manufacturing companies at CMO Dialogues, a webinar held by Mint on Tuesday.
Demand for vehicles in the urban markets has to pick up in the coming months for the industry to witness a proper recovery, as most of the demand for passenger cars comes from cities, they added.
Sales during festivals constitute around a fourth of the overall vehicle sales in a fiscal and most vehicle makers have increased production and wholesale of vehicles to build inventory at dealerships anticipating a jump.
In the last two years vehicle sales during Navratri and Diwali remained subdued due to economic slowdown.
According to Shashank Srivastava, executive director, marketing and sales, Maruti Suzuki India Ltd, sentiment always play a big role in festive demand and, if, the situation related to Covid – 19 does not worsen then the industry and Maruti could look forward to a good festive season this year.
“Government spending in rural economy has also driven the sentiments. While we say that Bharat is leading India’s growth, it cannot carry India. This means that unless the urban demand recovers, we may not see the great demand revival that we are expecting," he added.
Vehicle manufacturers have been witnessing continuous decline in sales from the second half of FY 19 due to economic slowdown and increase in prices of vehicles as a result of transition to the new safety and Bharat Stage 6 emission norms. In FY 20 sales of vehicles fell in the range of 15% to 25% across categories after reporting low single digit growth in FY 19.
According to Tarun Garg, director, sales and marketing, August has given the auto industry some hope since sales were higher by 35% higher during Ganpati festival on a corresponding basis, and Kerala too showed growth.
“There is a 20% swing between the urban and rural markets and this highlights how strongly rural demand has come up. However, the big growth for cars has to come from the cities because that’s where the basic demand lies. The sentiment and the economy have to improve and that is what we are looking forward to," added Garg.
Post lockdown vehicles sales especially of entry level cars and motorcycles, in the rural market picked up faster due to a healthy monsoon, good summer crop and less infections of Covid -19. Hence, manufacturers are expecting rural to perform better than urban markets during the festival season.
“Fundamentally, the penetration remains very low in the rural market. There are ample robust factors that tell us that demand will be sustained in the long term in rural markets.
When it comes to affordability, good spread of monsoons, along with strong kharif sowing after good rabi output augurs very well," said Naveen Chauhan, national head, sales and after sales, Hero MotoCorp.
“Rural has always led urban demand by 4-6%, in these times it has gone up by 8-10%," added Chauhan.
“What has happened to stock market during the Covid period has also changed people’s perception that rather than saving why don’t we come out and enjoy the finer things in life. That’s what our new campaign also talks about. These new used cases we feel may drive festive demand. Customers are splurging on cars at the top end -- like S Class, GLE and GLS. But during the festival season it is time for customers to also go for the bottom segment priced at ₹40 lakh and above," said Santosh Iyer, vice president, sales and marketing, Mercedes-India Ltd.