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India’s leading passenger vehicle manufacturers increased production and dispatches to dealerships in July, compared to the preceding month, as states eased lockdown restrictions further following a sustained decline in covid-19 cases. Most dealerships resumed operations across India and manufacturers moved in to fill the inventory levels.

In the March quarter, most passenger vehicle manufacturers reported a sustained recovery in retail sales, while supply constraints because of shortage of semiconductors led to high waiting period for some models and depleted vehicle inventory. Manufacturers started production across all three shifts from the second half of June and have set high production targets in the run up to the festive season.

Maruti Suzuki India Ltd, the largest car maker, increased domestic dispatches on a sequential basis by 9.83% to 136,500 units, up from 124,280 units in June. Its passenger car sales rose 30.40% to 91,403 units, while sales for utility vehicles jumped 8.28% to 32,272 units. The second-largest vehicle manufacturer, Hyundai Motor India Ltd, reported a 18.63% month-on-month rise in wholesales to 48,042 units in July, from 25,001 units in June.

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Mumbai-based Tata Motors saw passenger vehicle wholesales grow 25.19% to 30,185 units as demand for its new products, such as the Altroz, witnessed steady demand. MG Motor India reported an 18.74% increase in sales to 4,225 units, while Toyota Kirloskar Motors increased dispatches by 48.7% to 13,105 units.

“The Hector and ZS EV have further gained momentum during the month. However, the severe shortage of chips is expected to continue for some time and will lead to supply constraints. While we expect overall consumer demand to rise, we should remain cautious of the potential threats posed by the third wave," Rakesh Sidana, director, sales, MG Motor India, said.

The auto industry has been under pressure since the first week of April when Maharashtra began imposing strict lockdown measures. Subsequently, Delhi, Haryana, Karnataka, and Tamil Nadu, among others, also clamped down on movement.

Consequently, vehicle manufacturers, including Maruti Suzuki, Hero MotoCorp Ltd, and Hyundai, stopped production or cut down on output significantly. Some others, such as Bajaj Auto Ltd, however, continued to operate with limited capacity to meet export demand. With a steady drop in infections, especially in north and south India, most automakers have resumed operations from mid-May.

Vehicle sales are usually compared on a year-on-year basis, but as companies had to close their factories and showrooms in May 2020, with the government imposing a stringent nationwide lockdown from 25 March to contain the spread of coronavirus, the month-on-month comparison hints at a recovery in the automotive industry. For most companies, operations remained suspended till the first week of May and returned to normal production schedule in July.

Economic activity picked up following the resumption in construction and manufacturing activity and commercial vehicle wholesale of Tata Motors jumped 11.23% to 21,796 units.

“The strong demand momentum has continued. Inquiry levels are healthy and up by 10% over July 2019 levels, while bookings are flat. Salary increases for government employees have also created passenger vehicle demand, leading to higher retail. With the surge in fuel prices and increased penetration of CNG in newer cities, the demand for CNG-run vehicles has increased, benefitting Maruti Suzuki. All original equipment manufacturers have a waiting period of 1-4 months. Inventory in the system is 10-20 days," said Motilal Oswal analysts in a report on 28 June.

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