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Business News/ Auto News / Retail demand to be key as automakers continue record vehicle production in Feb
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Retail demand to be key as automakers continue record vehicle production in Feb

Both passenger vehicles and two-wheelers saw higher wholesale compared to retail growth in February

Tata Indica passenger cars move along an assembly line at the Tata Motors Ltd.'s Pimpri manufacturing facility in Pune, India Wednesday, October 29, 2003. India's biggest automobile company reported its highest quarterly profit in at least three years after the company boosted vehicle sales and earned more from non-manufacturing businesses and exports. Photographer: Santosh Verma/Bloomberg NewsPremium
Tata Indica passenger cars move along an assembly line at the Tata Motors Ltd.'s Pimpri manufacturing facility in Pune, India Wednesday, October 29, 2003. India's biggest automobile company reported its highest quarterly profit in at least three years after the company boosted vehicle sales and earned more from non-manufacturing businesses and exports. Photographer: Santosh Verma/Bloomberg News

NEW DELHI : The era of inordinately long waiting periods for passenger vehicles may be ending as carmakers continued to ship a record number in February, building up stock in the dealership network. 

Carmakers will therefore have to keep a close watch on demand, as inventories, which have already reached 26 days, are likely to pile up in showrooms with original equipment manufacturers having been able to fulfil pending orders and incremental sales depending solely on the pace of fresh demand, a top industry executive said.

The industry is expecting to end the fiscal year in March at a growth of 8.1% at 4.2 million units, Shashank Srivastava, senior executive director, Maruti Suzuki, India's largest carmaker said. 

For two-wheeler makers Hero MotoCorp, TVS Motor Co and Bajaj Auto, factory-gate dispatches clocked a strong double-digit growth in February compared to a year ago, even as registrations of two-wheelers grew at a much slower pace (13.2% for all two-wheeler OEMs, including EVs, in February year-on-year), leading to inventory addition at showroom, analysis by brokerage Elara Capital showed. 

For Royal Enfield, which manufactures premium motorcycles such as the Classic 350 and Himalayan, however, wholesales grew at a mere 5% whereas retail registrations shrank 1.3% last month compared to the same month in 2023.

Sales of electric two-wheelers, however, remained flat compared to last month, reflecting a stagnation in demand. Registrations of high-speed electric two-wheelers were up 24% year-on-year (due to the extra day in February because of 2024 being a leap year to a certain extent) but were flat compared to January at 81,963 units.

In February 2024, the passenger vehicle industry recorded wholesales of 373,177 units as opposed to 335,324 units of February 2023, growing at 11.3%, Srivastava said. 

The retail numbers are lower, estimated to be around 335,900 units against 301,900 units last year, which is also an 11.3% growth. However, the difference between wholesale and retail is about 40,000 units, which have been added to the stock. The stock level is now 300,000 units, which is around 25-26 days of stock in the industry, he added.

"So far since July of last year, we have seen pending bookings significantly come down and stock in the channel had come down. But not only is it pretty high again, the luxury for OEMs to push wholesale against retail is not there anymore," Srivastava told Mint.

However, inventory addition alone may not be cause for alarm.

According to Jay Kale, senior vice president, Elara Capital, it is normal for passenger vehicle makers to increase dealer inventory in the fourth quarter of the fiscal as they normally bring down production in December. 

"Hence, wholesale is normally higher than retail in Q4. For two-wheeler makers, after a good festive season dealer inventory had come down to comfortable levels this year and hence there is more scope for adding inventory this year. Also, with the preponement of the marriage season this year, companies want to be well stocked for demand," Kale said.

Sport utility vehicles (SUVs) continued to drive demand for passenger vehicles and accounted for 51.5% of all passenger vehicle sales in February, with the segment expected to account for just over half of the entire industry's sales in FY24. 

"We saw that rural growth cumulatively was at 11.7% between April and February, higher than growth in urban sales at 8%," Maruti's Srivastava said.

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ABOUT THE AUTHOR
Alisha Sachdev
Alisha Sachdev reports on the auto and mobility sector, with a special focus on emerging clean mobility technologies.
Catch all the Auto News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
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Published: 01 Mar 2024, 08:27 PM IST
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