Improved demand: Festive season buying lifts auto sales in October

Maruti Suzuki reports 4.5% growth in sales, first time in last seven months.

By:Updated: November 2, 2019 8:11:19 AM

After a prolonged slowdown, automobile firms, including Maruti Suzuki India, Mahindra & Mahindra and Toyota Kirloskar Motor, on Friday reported improved sales in October driven by festive season demand. A series of production cuts which led to better inventory management by manufacturers also contributed to improved numbers during the month. Maruti Suzuki India, the largest passenger vehicle manufacturer, posted a growth of 4.5% in its domestic wholesales at 1,44,277 units. This is the first time in the last seven months that the company has seen an increase in its domestic sales. Despite being in the negative territory, Mahindra & Mahindra managed to arrest a decline in sales, posting an 11% dip at 49,193 units. In September the company had reported a decline of 21% in domestic sales at 40,692 units.

Overall, passenger vehicles despatches witnessed an estimated decline of around 4% year-on-year (y-o-y) in October, in contrast to over 20% y-o-y dip in monthly volumes for the past one year. Manufacturers said retail demand picked up as the majority of the festivals fell in October including Dhanteras, which accounts for over half of the festive season sales. Mahindra & Mahindra and Tata Motors (which also reported double-digit decline in wholesales) said that their retail sales were much better and wholesales do not reflect the actual demand. Anand Mahindra, chairman, M&M, said the industry needs to switch to reporting retails and not wholesale volumes. “There are some strong signs of life in the market and pipeline stocks have been slashed by controlling billings to dealers. Very appropriate stock levels now,” Mahindra said.

“In October retail sales were the highest in this fiscal recording a 70% increase month-on-month,” Mayank Pareek, president, passenger vehicles business at Tata Motors, said. Analysts said retail sales showed some signs of recovery in passenger vehicles in October. “Our industry interactions lead us to believe that festive season retail sales are up by mid-single digit, which also benefited from a sharp jump in discounts,” analysts at Nomura noted.

Two-wheeler sales, however, failed to pick up in October as volumes declined by around 19.2% y-o-y. As inventory at dealers was the highest in this category, manufacturers produced lesser units. Analysts, however, believe retails improved in October compared to a month earlier. “Festive season retail sales have seen low single digit growth, based on our dealer checks, showing signs of growth bottoming out,” analysts at Nomura said.

Rakesh Sharma, executive director, Bajaj Auto, said the company witnessed highest ever retail sales in October. “What the festive season has done is that the negative growth of over 15% seen earlier seems to have absolutely bottomed out, now we have to navigate through turbulent change and need to observe consumer behaviour during BS-VI transition,” Sharma told a business news channel.

Commercial vehicle demand continued to remain sluggish with overall sales declining by an estimated 25% y-o-y, the ninth consecutive month of fall. Volumes were down impacted by plant shutdown by manufacturers including Ashok Leyland and M&M and Tata Motors. In October, while Ashok Leyland’s volumes fell 37% y-o-y, M&M and Tata Motors reported a 3% y-o-y and 34% y-o-y dip in despatches.

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