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Business News/ Companies / News/  Auto cos wary of softening sales

Auto cos wary of softening sales

Sales of automobiles across segments are expected to fall in the range of 25-45% in FY21, according to a forecast by Siam

Two-wheeler sales in the rural markets are down 10-15% from a year ago.mintPremium
Two-wheeler sales in the rural markets are down 10-15% from a year

Automakers and dealers are uncertain whether the sales momentum seen in the past few months through the festive season will sustain with broader macroeconomic factors such as shrinking economic growth expected to weigh heavily on the demand outlook.

Industry experts said overall passenger vehicle sales during the 10-day Navratri festival, which concluded on Sunday, just managed to touch the low base of last year when demand was affected by several factors. However, softening demand for two-wheelers, especially in the rural markets where sales fell 10-15% from a year earlier, remains a huge concern.

“Whatever pent-up demand was there will be over by the festive season. In the urban market, people are expected to spend a bit of their bonuses during Diwali, but beyond that, the economy has to improve for vehicle sales to go up. Fundamentally, nothing has changed in our economy, and covid cases are rising. Small businesses are closing, which will impact rural demand," said Nikunj Sanghi, an automobile dealer and member of lobby group Federation of Automobile Dealers Associations.

“Some OEMs (original equipment makers) like Maruti, Hyundai and Kia have done well, and sales are almost like last year. But two-wheelers are down by almost 15-20%. Two-wheeler bookings for Diwali have also not been great till now," he added.

Top executives at auto firms and parts suppliers are concerned about a further contraction in demand after the festive season if there is no meaningful recovery in the wider economy and if a second wave of covid cases start to sweep through the country during the winter.

According to a senior executive at a passenger vehicle manufacturer, sales have been better than last year, but the demand scenario post-Diwali remains uncertain. “Till the arrival of a vaccine, the need for personal mobility is likely to push sales. That will not disappear suddenly. Overall, the economy needs to recover for the current momentum to sustain," said the executive requesting anonymity.

On Monday, Rajiv Bajaj, managing director, Bajaj Auto, told CNBC TV-18 that retail sales of entry-level two-wheelers declined 30% during Navratri and the company is extremely concerned about demand after the festive season. Sales of automobiles across segments are expected to fall in the range of 25-45% in FY21, according to a forecast by Society of Indian Automobile Manufacturers (Siam).

Due to subdued sales in the last two years, more than 300 dealerships in the country have closed, and some are in the process of winding up as covid-19 related economic downturn has further crippled their finances.

Nashik-based Moharir Auto, which has dealerships of Ford, Jeep, Yamaha and Suzuki, among others, has witnessed good traction through the Navratri and Dussehra festivals.

“We have seen good retail offtake during Navratri and Dussehra across passenger cars and two-wheelers. We could have sold more had there been more supply of vehicles. Among the two-wheelers, increased retail demand came for entry- and mid-level models," said Om Moharir, owner of Moharir Auto.

He, however, added that there is no visibility of how the demand scenario would fare post the festive season. “December usually sees discounts, but that depends upon the inventory pile-up. We will have to wait to figure if stocks will build up," he said.

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Published: 27 Oct 2020, 06:42 AM IST
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