For India’s automobile companies, there seems to be no sign of shifting to a higher gear. The impact of the global chip shortage was starkly visible on dispatch numbers of carmakers, while two-wheeler companies struggled with the onslaught of electrification.
Chip shortages continued to impact auto sales in September. The most impact was visible on passenger vehicle (PV) sales that remained subdued despite strong demand. Overall dispatches at Maruti Suzuki India Ltd fell 34% from August, and a sharper 46% from the year-ago period. Mahindra & Mahindra Ltd’s (M&M) PV volumes didn’t fare well either, dropping 18% month-on-month (m-o-m). Tata Motors Ltd, though, sho-wed a modest drop of just 8%.
“September saw the worst supply chain challenges, which affected wholesales for passenger vehicles and premium two-wheelers, though the situation is expected to gradually improve from October,” analysts at Motilal Oswal Financial Services Ltd wrote in a note.
With production impacted from the chip shortage, the usual inventory build-up seen before festive season is missing this year, leading to long waiting periods for eager consumers. At worst, they may postpone their festival purchases.
“OEMs’ (original equipment manufacturers’) pre-festive channel filling has been impacted across categories due to production cuts across OEMs, which is likely to impact retail demand uptick in the festive season,” said analysts at ICICI Securities Ltd.
Companies have also been raising prices since January as input costs began to hurt. These hikes, along with rising fuel costs and now the lack of availability of vehicles, could mean automakers cannot cash in on the buoyant festive sentiment.
The trend in two-wheelers was mixed. Hero MotoCorp Ltd, Bajaj Auto Ltd and TVS Motor Co. Ltd reported 8-19% m-o-m surge in unit sales. To be sure, this is mainly towards inventory stocking ahead of the festive season. There is hope that demand would recover in the festive season. In the premium segment, Royal Enfield repor-ted a 27% m-o-m decline in unit sales despite new launches as chip shortage hit production.
Meanwhile, tractor sales and commercial vehicles (CVs) are giving reasons to cheer. Helped by better channels sales on the back of good rainfall, M&M and Escorts Ltd saw good m-o-m growth in their tractor sales. However, on a year-on-year (y-o-y) basis, tractors showed a sharp decline due to a high base.
CV sales showed the healthiest trend. Fleet utilization level is improving and is currently around 70% led by the economic recovery and piling up of inventory before the festive season, according to analysts.
CV volumes for Tata Motors increased by 34% y-o-y and were up 14% y-o-y for Ashok Leyland. But analysts at Kotal Institutional Equities warn that “going forward, CV industry volumes might get impacted due to the chip shortage”.
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