Outlets closed: Auto sales skid; forecast muted as Covid surges

According to Fada, the second wave of Covid has not only unsettled urban but also the rural markets, and therefore, recovery may take longer compared to the first wave.

By:May 11, 2021 8:29 AM
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Auto sales declined across categories in April and the outlook remains bleak with the second wave of the Covid triggering lockdowns across several states leading to closure of majority of dealerships. As a result, auto manufacturers like Maruti Suzuki India, Hero MotoCorp and others have not only advanced their annual maintenance shutdowns but also extended them. If the lockdowns stretch for long with several states extending the deadlines, company executives and analysts say that manufacturers would have no option other than further extending the shutdowns and curtail production.

If the retail sales numbers for April announced by the Federation of Automobile Dealers Associations (Fada) on Monday is seen, it points towards such a scenario. Though April sales numbers cannot be compared to the same month of last year because back then there was a nationwide lockdown, the numbers were down across categories on a month-on-month basis. Compared to the same month in 2019, which was also not a good year for auto sales, numbers saw decline across categories, minus the tractors. The association said that the first nine days of May saw extremely lean sales due to lockdown announced by majority of states. It said that even in places where dealerships are open, the walk-ins have dropped to 30% and customers are delaying their purchase decision.

According to Fada, the second wave of Covid has not only unsettled urban but also the rural markets, and therefore, recovery may take longer compared to the first wave.

The weak retail sentiments have already been taken into account by the manufacturers. In fact, Hero MotoCorp, which had initially announced a maintenance shutdown across all its manufacturing facilities from April 22 to May 1, and subsequently extended it till May 9, has now extended it by a week till May 16. Similarly, Maruti Suzuki, which had announced a maintenance shutdown between May 1-9, has now extended it till May 16.

At the company’s Q4 earnings conference on April 27, chairman RC Bhargava had said that it would be difficult to predict how the rest of the quarter will pan out given the uncertainties due to Covid.

In a recent interview to Bloomberg Television, Bhargava said that the company may halve its production capacity due to the surge of the virus which has led to closure of dealerships. According to him, half the sales outlets are closed at the moment.

Commercial vehicle manufacturer Ashok Leyland has also scaled down operations at some of its plants and the company plans to work for 7 to 15 days in May.

Mahindra & Mahindra said in a recent regulatory filing that it was expecting supply chain-related production challenges, foresees some impact in the first quarter as a result of low customer movement and dealership activity.

Honda Motorcycle & Scooter India (HMSI) has also announced a temporary halt of its production operations across all its four plants from May 1 till May 15.

Naveen Soni, senior VP, Toyota Kirloskar Motor, said, “Partial lockdown in different parts of the country has enhanced the gap between wholesale and retail. Also, sporadic lockdowns impacting different states and cities for varying durations has increased logistical challenges to supply the right vehicle to the right dealership and at the right time. We are trying our best to work around such logistical challenges so as to be able to meet customer requirements at the earliest.”

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