Retail sales of passenger vehicles and two-wheelers have shown steady improvement in June compared to the preceding month, as demand for entry-level cars and motorcycles continues to increase as a result of recovery in the rural economy. A good summer crop, healthy monsoon, and fewer covid -19 infections in the rural and semi-urban towns have contributed to a sharp turnaround in sales.
Sales in the domestic market had plunged in the March to May period because of the adverse impact of the coronavirus outbreak and the subsequent lockdown.
Retail sales of passenger vehicles declined by 38.34% year-on-year to just 126,417 units in June, according to data released by the Federation of Automobile Dealers Associations (FADA) on Tuesday. Sequentially though, sales improved significantly from just 30,749 units sold in May. The same trend can be witnessed in the two-wheeler and tractor segments as well.
The improvement in retail sales after the easing of restrictions in May have prompted most manufacturers to target higher production. However, factors such as the increasing number of covid-19 cases and shortage of manpower have limited the ability of auto makers to increase production of vehicles. Intermittent lockdowns announced in certain states have also impacted retail sales.
With the improvement in retail sales, leading automakers such as Maruti Suzuki India Ltd and Hyundai Motor India Ltd, have decided to ramp up manufacturing in their respective factories by adding shifts. Maruti has increased manufacturing of its entry level models such as Alto, Wagon R, and Celerio, while Hyundai has increased manufacturing of its Venue and Creta sport utility vehicles. Both companies have also witnessed significant increase in wholesales to fill the depleting inventory at dealerships.
Demand in the rural market has recovered faster than in the urban market because of the robust summer crop from the previous harvest and the timely arrival of the monsoon, which has led to improved retail sales of tractors, two-wheelers and small commercial vehicles, said Ashish Harasharaj Kale, president, FADA.
“The positive consumer sentiment in the rural market is backed by fiscal measures taken by the government to boost demand and this can also ensure the quickest return to normalcy for the auto industry. Overall demand, however, continues to be subdued, coupled with supply-side constraints and limitations in retail lending from non-banking financial companies. Hence normalcy in demand still seems quite distant and may not be there before the festive season," said Kale.
Retail sales of commercial vehicles also declined by a massive 83.83% to just 10,509 units in June, as a result of the abrupt halt in economic activity because of the pandemic. Showroom sales of motorcycles and scooters also dropped by 40.92% to 790,118 units during the month. Retails, however, improved sequentially from 159,039 units in May because of quicker recovery in demand for entry and executive segment of motorcycles.