The wholesale despatches from the factory gates of automobile companies declined by 30% in April 2021 compared with March 2021 due to the impact of the second wave of the Covid-19 pandemic. April could see total wholesales of 12.70 lakh vehicles against 18.19 lakh in March 2021. Vehicle manufacturing was restricted by many of the original equipment manufacturers (OEM) in April by either advancing the annual maintenance shut down or rationalising production, in the wake of sluggish demand on the back of dealers closing down due to lockdowns, as well as on the directions of the Centre to divert industrial oxygen for medical oxygen. With many companies extending their production halt period till the end of the current month, the wholesale despatch numbers are likely to much more negatively impacted for May.
According to data released by the Society of Indian Automobile Manufacturers (Siam) on Wednesday, sales of passenger vehicles fell by about 10.07%, compared to March 2021, due to various restrictions in states which have been experiencing a surge in Covid-19 cases. Sales of two-wheelers have also plummeted by 33.52%, while three-wheelers witnessed a de-growth of 57.01%, from March 2021 to April 2021. All data comparisons have been done month-on-month (m-o-m) as production was zero in April 2020 due to the nationwide lockdown.
Total production of passenger vehicles, three-wheelers and two-wheelers in April 2021 stood at 18,75,698 units as compared to 23,69, 237 units in March 2021, registering a drop of 21%. Giving a muted outlook, CARE Ratings said the first quarter would certainly be despairing, but not as bad as Q1-FY21. The shutdown of automobile manufacturing factories in the ongoing quarter shall deteriorate the production levels, but relieve the dealers of picking additional stocks and building unwanted inventories. Recovery in the domestic wholesales can be expected from Q2-FY22 onwards, contingent on a faster vaccination drive and no new waves of Covid-19 in the country.
Rajesh Menon, director-general, Siam said supply chain-related production challenges continue with the lockdown restrictions in many parts of the country. The demand has been impacted by the second wave of Covid-19, both in terms of low consumer sentiments and closure of dealerships due to lockdown restrictions.
According to recent Fada data, the vehicle registrations- the indicator for retail auto sales- for April 2021 too had witnessed a double-digit fall of 28% m-o-m, as most of the states started going under lock-down beginning April 5 onwards.
CARE Ratings further said that May 2021 is expected to witness a further sluggishness over April 2021. The closure of dealer showrooms would lower dealers’ cash flows and the retail sales of this industry. Additionally, the ongoing rally in metal prices could lead to another round of price hikes of vehicles. To make things worse, this year the infected cases have spiked even in smaller towns, which could potentially unrest the two-wheeler and tractor demand in rural India.
Tarun Garg, director, sales, marketing & service, Hyundai Motor India said, “As a responsible and caring brand, Hyundai has always been trying its best to give back to society in whichever way possible. In these challenging times, we stand in solidarity with the nation and are continuing all efforts to support the affected. While our efforts presently focus primarily on supporting the lives and livelihood of people, we have also received positive sales results in April 2021.”
ICICI Direct Research said that healthy sequential growth momentum being witnessed in the auto space over the past few months halted in April 2021, as the resurgent pandemic took a toll on OEM sales. With several states under lockdown and retail offtake outlook impacted for the near term, dispatches fell away by double digits across most players and segments. Several OEMs have announced the partial closure of manufacturing operations for May, thereby indicating that similar subdued performance will be in the offing this month as well. Given that April 2020 was lost completely to the nationwide lockdown, the YoY comparison is redundant.
Yadvinder Singh Guleria, director, sales and marketing, Honda Motorcycle & Scooter India, said, “Regional lockdowns since the beginning of April have dragged down the consumer sentiments considerably. While the need for personal mobility still exists, the recovery may be pushed back by few months as staying safe at home is India’s priority.”
Nomura in a research note wrote while wholesales have been less affected in April, the impact is likely to be higher in May 2021. It expects the wholesales to drop from May as inventory levels catch up, indicating that data for the next one-two months could remain volatile and even rural segments like tractors may have an impact due to lockdowns and as consumers stay at home.
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