Wholesale despatches of cars and two-wheelers picked up considerable pace in June driven by demand from rural and semi-urban markets. After a washout in April and a sluggish May when factories resumed production and showrooms were thrown open, volumes in June suggest consumers are buying. While the drop in despatches in April and May was 80% year-on-year, they were much improved in June with the drop at between 30 y-o-y and 60% y-o-y. Tractor sales too have been very strong in June. However, volumes for commercial vehicles remained depressed as Ashok Leyland reported an 80% year-on-year fall in June despatches. Hero MotoCorp which reported a fall of just 31% y-o-y in June, selling 4.5 lakh two-wheelers, said the fundamentals of the economy appeared to be robust. Pawan Munjal, chairman & CEO – Hero MotoCorp, said 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.
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“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,” Munjal said. Analysts at Nomura have gleaned from interactions with dealers that retail sales have largely come back to pre-Covid-19 levels in June for tractors, about 80-90% for two-wheelers and to around 60% levels for passenger vehicles.”Given the production constraints due to Covid-19, wholesale in general may lag retail sales,” they noted.
Wholesale volumes at Maruti Suzuki were lower by about 54% y-o-y but registered a four-fold jump over volumes in May. The company said production across plants is being progressively increased as more workers resume their duties and it making all efforts to ensure their safety. Hyundai Motor India also fared well as it despatched 21,320 units nearly three times the volumes in May; the Korean car maker’s sales were driven by the new Creta, new Verna, new AURA and traditional brands.
Toyota Kirloskar Senior VP Naveen Soni said special financing offers and buy back offers have helped bring customers back to dealerships. “Our retail sales are nearly twice the wholesales for the second month in a row and so the carrying cost of dealer inventory is down by more than 50% over the past two months,” Soni said. He added online enquiries as well as bookings were growing. Mahindra and Mahindra (M&M) despatched 8,075 units in the passenger vehicles segment, which was nearly twice the May volumes, though a decline of 57% y-o-y. The firm’s CV volumes suffered a fall of 36% year-on-year.
Auto industry executives said both the passenger car and small commercial vehicle segments were recovering. Veejay Nakra, CEO (automotive division), M&M said, rising rural demand and movement of essential goods across the country is driving the recovery. “Our key brands such as Bolero, Scorpio and Pik-Ups, are all seeing good traction. Managing the supply chain will be our key focus area as we ramp up production to meet this increased demand.”
With agriculture and allied industries being defined as essential services, tractor sales continued to be good. Hemant Sikka, president (farm equipment sector), M&M said, the timely arrival of monsoon, a record Rabi crop, government support for agri initiatives and good progress in the sowing of the Kharif crop have helped the sentiment. “These factors along with better cash flows in rural markets have helped boost tractor demand during June,” Sikka observed.
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