AUTO SECTOR’S ROAD TO RECOVERY

By OEM Update Editorial July 3, 2020 10:46 am

After historic April low, the sales in May and June hint gradual recovery for auto sector amid crisis.
-Subhajit Roy, Executive Editor

India is expected to be the world’s third-largest automotive market in terms of volume by 2026. According to the industry body Society of Indian Automobile Manufacturers (SIAM), the sector supports employment of more than 3.7 crore people and contributes to 15 percent of GST amounting to Rs 1,50,000 crore every year. However, the sector that was already facing an unprecedented challenge with 18 percent degrowth last year, is among the worst hit sectors by the coronavirus. As per an assessment made by SIAM on the impact of COVID-19 on demand for vehicles in the current financial year, the Indian automobile sector could have a de-growth in the range of (-) 22 percent to (-) 35 percent in various industry segments, for the year FY21.

On a positive note, after zero sales in April due to nationwide lockdown, the Indian automobile sector saw some demand returning in the month of May thanks to partially opening up of operations. Now as Unlock 1.0 eased up lockdown restrictions, most of the automobile manufacturers posted an uptick in wholesale sales in June. Though, in comparison to June 2019, sales for almost all auto-makers have declined drastically, but in comparison to May 2020, there’s a significant increase in sales figure. Experts believe the situation will improve in months to come. Here we take a closer look on the month-over-month sales performance of some of the key auto-makers.

Maruti Suzuki sold over 200% more cars in June
Maruti Suzuki posted total sales of 57,428 units in the month of June including 52,300 units in the domestic market and 839 units to another OEM. In addition, the company exported 4,289 units in June 2020. In May, the carmaker had sold a total of 18,539 units. This included 13,865 units in the domestic markets, 4,651 units to export markets and 23 units to other OEM. When compared with the figures of May, Maruti Suzuki recorded a month-on-month growth of over 200 percent.

With this, the company closed the first quarter of FY 20-21 with total sales of 76,599 units that include 66,165 units domestic, 862 units to other OEM and 9,572 units exported.

“The sales performance during June 2020 and Q1 FY 20-21 should be seen in the context of the ongoing COVID-19 pandemic, lockdowns and restrictions required for safety,” the company said in a statement.

It adds, “The company remains committed to the health, safety and well-being of all members across the value chain. Production across plants is being progressively increased consistent with maximum efforts to ensure safety and subject to the availability of employees.”

Mahindra’s auto sector sells 19,358 vehicles in June
In June, Mahindra & Mahindra announced total sales of 18,505 vehicles in the domestic market, including 8,075 passenger vehicles, 10,417 commercial vehicles and 13 three-wheelers. Exports for the month of June were at 853 vehicles. In May, the auto-maker sold a total of 9,076 vehicles in the domestic market, including 3,867 passenger vehicles, 5,179 commercial vehicles and 30 three-wheelers. Exports stood at 484 vehicles in the month of May.

Commenting on the performance, Veejay Nakra, Chief Executive Officer, Automotive Division, M&M Ltd. said, “The automotive industry has started to see recovery both in the passenger and small commercial vehicle segments. This has been led primarily by rising rural demand and movement of essential goods across the country.”He said, “Managing the supply chain will be our key focus area as we ramp up production to meet this increased demand.”

Toyota Kirloskar Motor doubles its sales
Toyota Kirloskar Motorn (TKM) announced that the company sold a total of 3,866 units in the month of June, thereby more than doubling its wholesales when compared to May (1,639 units in May 2020).

Commenting on the sales growth, Naveen Soni, Sr. Vice President, Sales & Service, TKM said, “Post COVID the market has been showing a shift towards entry level suffix in all products that we sell and we are monitoring such trends and adjusting our future production according to market demand based on Toyota Pull System which supplies vehicles to dealers when it is required, where it is required and how much is required. Our production side has been helping us ramp production to be able to meet customer requirements.”

Honda Cars resumed partial production
As Unlock 1.0 eased up lockdown restrictions, Honda Cars India Ltd (HCIL) resumed production operations partially and dispatched 1,398 units in domestic market in June 2020 whereas the number of export units stood at 142 units last month. In May, Honda Cars had dispatched 375 units in the domestic market.

Speaking on the current situation, Rajesh Goel, Sr. Vice President and Director, Marketing & Sales, HCIL said, “Amidst the COVID-19 crisis, June was significant for us as we resumed our production partially from mid of the month while exercising utmost caution and highest safety protocols in our plants. The pace of deliveries is more than double of our dispatches in June.”

He adds, “HCIL was in the middle of BS-6 transition when the lockdown happened, so ever since our production resumed, our priority is to quickly roll out the awaited models including All New City, New WR-V, Civic BS6 diesel and New Jazz. Three of these models will be launched in the next two weeks and accordingly we will progressively ramp up our volumes to cater to the market effectively.”

The company had sold 10,314 units in domestic market in June 2019.

MG Motor India dispatches 2,012 units in June vs 710 units in May
In June, MG Motor India Pvt Ltd announced dispatch of 2,012 cars including 1,867 units of Hector sports utility vehicle (SUV) and 145 units of its electric SUV MG ZS. In May, the company had sold just 710 units amid severe supply chain constraints.

Rakesh Sidana, Director – Sales, MG Motor India said, “Even though our sales performance in June 2020 was better than May this year, we continue to face headwinds in supply chain and logistics due to multiple issues. Our teams are doing their best to overcome these challengesand we are looking forward to the launch of the Hector Plus in July 2020.”

Ashok Leyland records recovery in sales
Hinduja Group flagship firm Ashok Leyland reported recovery in monthly sales. In June, the company’s total vehicle sales stood at 2,394 units against 1,420 units in May. The company had sold 12,810 units in the same month last year, Ashok Leyland said in a regulatory filing.

Total domestic vehicle sales stood at 2,132 units in June as against 1,277 units in May. Medium and heavy commercial vehicle (M&HCV) sales in domestic market were at 572 units last month as compared with 266 units in May. Light commercial vehicle sales last month stood at 2,132 units as compared with 1,154 units in May.

VECV sold 1,358 vehicles in June vs 686 vehicles in May
VE Commercial Vehicles Limited, a subsidiary of Eicher Motors Limited, reported sales of 1,358 vehicles in June compared to 686 vehicles sold in the month of May. The company sold 1,321 trucks and buses in India and exported 305 vehicles and 37 Volvo Trucks.

“In accordance with the directives of the Government and relaxations of lockdown in the country owing to COVID-19 pandemic, VE Commercial Vehicles Ltd. commenced lean operations across all plants in the month of May. As per government and administrative guidelines for the phased opening of the lockdown, many of the VECV’s suppliers and dealerships have also resumed their services,” a statement issued by the company on 1st June said.

Hyundai Motor registers total sales of 26,820 units 
Hyundai Motor India Ltd registered cumulative sales of 26,820 units for the month of June. In May, the Korean car maker announced cumulative sales of 12,583 units of which it had sold 6,883 units in the domestic market and 5,700 units had been exported.

Commenting on the June sales performance, Tarun Garg, Director (Sales, Marketing & Service), Hyundai Motor India said, “As a responsible and caring brand, Hyundai Motor India is committed to support country’s objective of reviving the economy at the earliest. Our newly launched products like All New CRETA, Spirited New VERNA, All New AURA as well as traditionally strong brands like ELITE i20, VENUE, SANTRO and GRAND i10 NIOS have been receiving encouraging customer response. This has helped us achieve a wholesale volume of 21,320 units in the domestic market for June 2020. Additionally, we have exported 5500 units showcasing HMIL’s commitment to Government of India’s ‘Make in India’ vision for the world markets.”

Signs of a speedy recovery in two-wheeler segment
Hero MotoCorp records sales of over 4.5 lakhs units two-wheelers
In the two-wheeler segment, Hero MotoCorp reported four-fold jump in dispatches when compared to May this year. The company announced sales of over 450,744 units two-wheelers in June while it had sold 1,12,682 units in May.

“A major part of the market demand is emanating from the rural and semi-urban markets, which have been helped to a large extent by the various stimulus packages rolled out by the government. A combination of multiple factors, including the forecast of a normal monsoon, a bumper Rabi crop and the upcoming festive season are expected to keep the momentum going over the next few months,” said Dr. Pawan Munjal, Chairman & CEO, Hero MotoCorp.

The sales in the first quarter of FY’21 was subdued due to the impact of COVID-19 and the effects of the closure of the plant operations and the retail outlets through the entire month of April and most of May. “Despite the challenging conditions, Hero MotoCorp sold a total of 563,426 units of motorcycles and scooters in the first quarter of Financial Year (April-June) 2020-21,” the company said in a statement.

Bajaj Auto sales in June grow 126% over May
Pune-based two-wheeler manufacturer Bajaj Auto reported a total of 2,55,122 unit sales in June 2020. The company sold a total of 1,46,695 two-wheelers in domestic market and exported 1,08,427 units last month. In May, Bajaj Auto recorded a total sales of 1,12,798 two-wheelers wherein domestic sale was at 39,286 units and exports stood at 73,512 units.

TVS Motor records 191,076 units two-wheelers sales
TVS Motor Company registered total sales of 191,076 two-wheelers in June as against wherein domestic two-wheeler registered sales of 144,817 units during the month. Motorcycle registered sales of 84,401 units in June and scooter sales of the Company registered 65,666 units. During the month of May 2020, the company registered domestic two-wheeler sales of 41,067 units.

“The market is opening up gradually post the lockdown, and we are witnessing a positive uptake in both domestic retail as well as exports. The company faced supply chain constraints in June, however, has undertaken various countermeasures, some of which have started yielding results in June itself. The company is expecting to overcome these in the month of July,” an official statement said.

Royal Enfield almost doubles its sales
Royal Enfield has reported total sales of 38,065 motorcycles in June compared to 19,113 in May. Domestic sales in June were at 36,510 units as against 18,429 units in May. Although, the niche bike maker has reported a 35 per cent decline in total sales in June.

ACMA fears delay in imports clearance may impact vehicle production
The auto component industry contributes 2.3 percent to India’s national GDP and provides employment to 5 million people. According to the Automotive Component Manufacturers Association of India (ACMA), the apex auto component industry body, the industry witnessed a growth of 14.5 percent posting a turnover of Rs. 3,95,902 crore (USD 57.10 billion) in the FY 2018-19 . While the exports showed a growth of 17.1 percent scaling to Rs. 106,048 crore (USD 15.16 billion) in FY 2018-19, the aftermarket grew by 9.6 percent to Rs. 67,491 crore (USD 10.1 billion) from Rs 61,601 crore (USD 9.2 billion) in the previous fiscal. ACMA fears delay in imports clearance may impact vehicle production as import consignments from China are being subjected to one-hundred per cent manual inspection resulting in inordinate delays in clearance.

Explaining the complexity of the automotive value chain and the need for permitting clearance of imports, Deepak Jain, President ACMA said, “The entire automotive value chain in the country is around USD 118 billion of which import of auto components is USD 4.75 billion, 4 percent of the total auto industry turnover. Some of the items imported from China are critical components such as parts of engines and electronics items for which we are yet to develop domestic competence. The automotive value chain is a highly complex, integrated and interdependent one; non availability of even a single component can, in fact, lead to stoppage of the vehicle manufacturing lines.”

Post the lockdown, production in the component industry is gradually picking up in tandem with growth in vehicles sales, it is therefore in the best interest of the industry and the economy that any further disruptions are best avoided, he said.

Jain said the auto component industry in India is committed to the ‘Atmanirbhar vision’ of Prime Minister Narendra Modi.