June PV sales inch up; growth seen at moderate pace ahead

Demand for new models and recovery in rural economy may aid automobile industry.  (Mint)
Demand for new models and recovery in rural economy may aid automobile industry. (Mint)

Summary

  • Passenger vehicle industry saw its best dispatches ever in the first half of the year

Factory-gate dispatches of passenger vehicles rose 1.9% from a year earlier in June to 327,700 units hinting at steady demand for new models. While growth in June moderated due to a high base of last year, the passenger vehicle industry saw its best dispatches ever in the first half of the year, surpassing the 2 million mark, up 10% from the January-June period of 2022.

Automakers expect growth to continue at a moderate pace on the back of demand for new models, and a revival in the rural economy even as vehicle production improves gradually amid an easing in the supply crunch of semiconductor chips from the second quarter, Shashank Srivastava, executive director, Maruti Suzuki, said, adding, however, that a “tightness" in chip supplies remains.

For market leader Maruti Suzuki, wholesale dispatches for June came in at 133,000 units, rising 8.4% from 122,700 a year earlier. According to Srivastava, retail registrations and wholesales are converging to similar levels as wholesales match the pace of retail offtake.

“For the industry, hatches contributed 32% till June, sedans 9.6%, multi-purpose vehicles (MPV) 8.6% and SUVs was at 43%. Rural growth for Maruti Suzuki was about 14% and urban growth was at 11%. Our penetration in rural sales was at 43.5%, slightly higher than last year, while total pending bookings for us stood at 355,000 units," he said.

Even as chip supplies gradually improve, the auto sector witnessed lost production volumes due to the chip shortage in the June quarter.

“There was production loss in Q1. We are still estimating the exact number. There was an adverse impact in April, May, and June. Last year, we lost about 170,000 vehicles with Q3FY23 and Q4 FY23 losses in the range of 45,000 and 38,000 units, respectively. So, the loss could be similar for the last quarter as well. As regards the visibility, going forward, it appears that in Q2, availability will be much better than what we saw in Q1. So yes, probably you’ll see a much better production of some models, which have had long waiting periods at Maruti Suzuki," Srivastava said.

“We are projecting sale of 2.1 million units for the second half of the year. The growth figure, of course, will look lower than what it is today because of the higher base of Q2 for this year. A lot of factors contributed to the 2 million in sales in H1: a lot of new launches, the overall demand pattern reflected continued confidence, and rural markets looked reasonably strong," he added.

“Although we are watching carefully how the monsoon progresses, and it looks like there was a shortfall in June, but expectedly in July, it is likely that the monsoon may again come back to normal levels. So, we have to watch it carefully, especially because of the El Nino effect," Srivastava said.

“These are mainly the new models, which came through, and also improvement in the supply situation because, last year, we were just coming out of that really bad semiconductor issue. The semiconductor issue became a little better than what it was last year, so this contributed to overall numbers," he said explaining the sales performance.

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