Tuesday, January 26

Bounce in July sales to bring auto counter alive

July sales figures show there is light at the end of the tunnel for the auto sector as also the ailing economy in the midst of the uncertainty over the Covid pandemic.While Mahindra & Mahindra’s farm equipment sector notched up the highest ever tractor sales for the month, showing good cash flows to farmers and higher rural spending by the government, the country’s largest carmaker Maruti Suzuki saw an increase in demand from the first-time buyers and also people buying additional cars.

Maruti Suzuki reported 1.30 per cent year on year growth in domestic sales to 1.01 lakh units, while Mahindra & Mahindra witnessed nearly 28 per cent growth in tractor sales to 24,463 units.

In its recent conference call post Q1FY21, the Maruti management indicated that retail demand has reached around 85 per cent of pre-Covid level.

Likewise, two-wheeler major Hero MotoCorp reached more than 95 per cent of wholesale dispatch numbers of the corresponding month in the previous year. However, the country’s largest two-wheeler maker on Saturday reported a 3.97 per cent year on year fall in total sales to 5,14,509 units in July.

Commenting on auto sales number, Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research said, “There is a significant undercurrent of recovery in the domestic automobile sector driven by the increased need for personal mobility, particularly given the increased risk as well as continuing unavailability of public transportation mechanisms in the wake of Covid-19.”

“Healthy growth in the agricultural sector where the impact of the pandemic has been limited so far has also led to better demand accruing from the semi-urban and the rural areas,” he added.

The second-biggest car major Hyundai Motor India reported a mere 2 per cent fall in domestic sales in July, signalling a recovery in the sector. Escorts domestic tractor sales volume witnessed a growth of 9.9 per cent to 4,953 units in July.

“The situation has been continuously easing in the last few days of July, and hence we expect to go back to full capacity anytime up to mid-August 2020. We are optimistic for the coming months as the rural sentiments continue to remain positive, led by timely and widespread monsoon, higher sowing of Kharif crop and adequate availability of retail finance,” Escorts said in a release.

TVS Motor reported a 33.2 per cent decline in total sales in June at 1,98,387 units. However, it added that the market is opening up gradually post the lockdown, and the company is witnessing a positive uptake in both domestic retail as well as exports.

However, motorcycle maker Royal Enfield reported 26 per cent decline in total sales at 40,334 units in July 2020. The company had sold 54,185 units in the same month last year.

In terms of the performance on Dalal Street, the BSE Auto index gained 53 per cent since the beginning of the ongoing financial year. The index advanced 8 per cent in July.

Mayuresh Joshi, Head- Equity Research, William O’Neil India said, “July auto sales number stood encouraging. Affordable schemes and social distancing norms are playing out for the sector. Investors should stay with leaders in the sector.”

Earlier, the first quarter proved to be painful for the industry due to the nationwide lockdown. In fact, the auto sector registered ‘nil’ sales in April.

Source: ET Markets

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