Companies step up production in line with rising demand as lockdowns ease
India’s largest two-wheeler maker expects demand to sustain till at least the festive season
Hero MotoCorp Ltd and Bajaj Auto Ltd plan to sharply expand two-wheeler production amid a sustained recovery in demand in rural and semi-urban markets since the easing of the lockdown, three people familiar with the matter said.
Hero MotoCorp’s senior management informed its vendors about the plan to ramp up manufacturing to 650,000-700,000 vehicles a month at a meeting last week, one of the three people cited above said on condition of anonymity.
India’s largest two-wheeler maker expects demand to sustain till at least the festive season, the person said.
“Hero is really bullish about increasing production. In July, it might touch pre-covid levels. The challenge though will be to keep increasing production amid the lockdown in Chennai, lack of manpower and increasing infections," the person said. “Due to a pickup in sales, Hero has an inventory of around 200,000 units, which is significantly lower than usual".
Hero last crossed the 700,000 production mark in September and October 2018, when the Indian economy was growing at a decent pace.
The latest plans would be a sharp jump from the 450,000-500,000 two-wheelers Hero was producing each month before the pandemic.
Meanwhile, Bajaj Auto expects to boost monthly production during the coming months starting from August to 320,000-350,000 units, matching the year-ago levels, despite challenges at its plant in Aurangabad, where several workers were found infected. This shows the company will cross pre-covid output levels in the run-up to the festive season.
Demand for entry-level motorcycles has recovered faster, especially in rural and semi-urban India, following a normal monsoon, good summer crop and the preference for personal mobility over public transport.
With retail sales picking up after the gradual easing of the lockdown in May and June, Hero, Bajaj Auto and Maruti Suzuki are ramping up output in line with rising demand. However, rising cases of covid, intermittent lockdowns by states, and limited manpower are acting as a dampener.
In June, Hero dispatched 450,744 units to its dealerships, up from 112,682 units in May. Bajaj Auto dispatched 255,122 units, up from 112,798 units in May.
“Hero has been losing market share in the last few years as volume was shifting towards the premium side of the market. Now tables have turned and revival of demand in the rural market gives Hero the opportunity to increase its market share and widen the gap with Honda Motorcycle and Scooter India which had been narrowing in the past few years," said the second person cited above, also requesting anonymity.
An emailed query sent to a Hero spokesperson on Friday remained unanswered.
Rakesh Sharma, executive director of Bajaj Auto, said the recovery is still fragile because of lockdowns and a surge in covid-19 cases in various places.
“Indeed, the resumption in sales in June was surprisingly swifter than anticipated and that trend has continued into July which looks like being at 90% levels of previous July. We think this is a combination of pent up demand, better rural incomes and, to some extent, people assessing two-wheelers to be a safer choice," Baja Auto’s Sharma said.
The maker of Pulsar and KTM range of motorcycles had produced only 350,000 units in the June quarter, a 66% decline from a year earlier.
“We will have to see how retails perform through these months because last year’s production ramp-up anticipating demand uptick in Dhanteras and Diwali led to a lot of channel inventory build-up," said the third person cited above.
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