Automakers miss festive recovery in October

Chip shortage, steep hike in raw material cost pull down auto wholesales by 25%

By:November 13, 2021 9:14 AM
A customer looks at a car at a Maruti Suzuki dealership (Image for representational purposes only)

Signalling continuation of a rough ride, the overall automobile wholesales in the country saw a 25% year-on-year decline in October, thanks to lingering semiconductor shortage coupled with  steep hike in raw material cost which have been a major spoilsport for the industry.  

The passenger vehicle wholesale despatches from automakers to the dealers in October recorded a 27% decline while the two-wheelers were down by 24.94%  as compared to October 2020. Though the numbers of three-wheelers in October 2021 sold were more than the previous year, it was still less than half of what was sold in October 2019, data released by Society of Indian Automobile Manufacturers (Siam) on Friday showed.

Rajesh Menon, director general, Siam, said manufacturers were banking on the festive season to recover from the severe drop in sales they have faced in the early part of financial year 2021-22. However, shortage of semiconductors and steep hike in raw material cost have been a major spoilsport for the industry.

Experts commentary were also pointed to the continuing negative impact on the auto industry. ICICI Securities said PV makers’attempt to make up for the limited channel filling during pre-festive period across categories was impacted by production cuts while two-wheeler  (2W) faced high channel inventories of 8-10 weeks. Entry-level demand trends across 2Ws and PVs have remained weak. OEMs were hoping to stoke consumer sentiment with new launches even as availability of popular models remained elusive, it added.

Wholesale despatches of passenger vehicles by automakers like Maruti Suzuki India, Hyundai Motors, and Mahindra and Mahindra (M&M) were hit in October due to the ongoing global shortage of semiconductors. The low despatches were  also the result of production cut by companies, which began since August.

Emkay Global Financial Services in a preview had predicted that passenger vehicles’ volumes were likely to be hit by the chip shortages, though better on a sequential basis. Two-wheeler wholesales were also likely to decline due to lower retail sales and high-base effect on account of inventory filling last year.

According to Siam data, the total production of passenger vehicles, three-wheelers, and two-wheelers was at 22,14,745 units in October 2021 as against 28, 30,844 units, a year ago period, registering a drop of 22%. The country exported 4,56,698 units of total vehicles in October 2021 as compared to 454,637 units, reporting a flat growth.

Siam, while hailing the government recently for coming out with a structured list of PLI parts and procedural details in a short span of time, said, the members will study the both and discuss the feedback with the Centre.

Jefferies, in its research note, has said that it expected that wholesales to decline y-o-y for most OEMs amid subdued demand in 2Ws and chip constraints in PVs. Motilal Oswal said the y-o-y decline in wholesales reflects the weak demand during the festive season. The semiconductor shortage was expected to continue in the second half, though there would be improvement in supplies over 2QFY22 levels.

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