BackJanuary auto wholesales slide as OEMs trim BS-4 stock to brace for BS-6 deadline
Original equipment manufacturers are left with barely two months to exhaust BS-4 vehicle inventory
PremiumAmid Budget blues, auto sales numbers that trickled over the weekend portrayed a declining trend.
This is not surprising given that the original equipment manufacturers (OEMs) are left with barely two months to exhaust BS-4 vehicle inventory.
Indeed, the largest car maker in the country Maruti Suzuki India Limited was an outlier, given that it had transitioned to BS-6 vehicles much earlier than its peers. Therefore, January sales inched up by 1.6% year-on-year (YoY) driven by the compact, mini and mid-size segment cars. Sales of Hyundai Motor India Limited contracted 4% with domestic sales declining a sharp 8%.
The trend was bleak in utility vehicles (UV) across companies. Maruti’s UV sales too fell 26% YoY, while that of Tata Motors Ltd and Mahindra & Mahindra Ltd (M&M) brought no cheer.
Dealers said the higher proportion of diesel vehicles put customers on a back foot given the emission issues that are in focus.
The situation was worse among two-wheeler manufacturers. According to Mitul Shah, vice-president- research, Reliance Securities Ltd, “the sharp double-digit drop in two-wheeler sales was a negative surprise". Hero MotoCorp Limited's sales tumbled 17%, and that of TVS Motor Company Limited registered an 18% drop.
Bajaj Auto Limited's sales numbers were not released at the time of publishing this story.
As expected, commercial vehicle (CV) manufacturers were worst performers, underscoring slowdown in economic activity. CV sales of two market leaders -- Tata Motors Limited and Ashok Leyland Limited fell 14-17% YoY. But, the medium and heavy truck sales fell about 30-40%. Falling truck rentals and the revised axle load norms paint a bleak outlook for the segment too.
“January wholesale were expected to be bad as both companies and dealers strive to clean up BS-4 inventory. But, with weak overall demand and little in the Budget to spur big-ticket item purchases, sales may continue to be weak in the near term," says Amyn Pirani, group executive vice-president, Yes Securities India Ltd.
Be that as it may, investors on the Street believe that the worst is behind the auto sector. At 1 pm, the Nifty Auto was up 1.4% .
Given the low base of the last few months and the uncertainty of BS-6 transition coming to an end soon, auto sales growth could look better in FY21.
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