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Auto rebound with 20% growth in August

While the overall improved performance of the auto industry is a cause for cheer, nobody is celebrating yet. With coronavirus cases still rising and the state of the economy highly uncertain, that would be premature

twitter-logoSumant Banerji | September 2, 2020 | Updated 00:38 IST
Auto rebound with 20% growth in August
Growth in August is on the bac of low base in the year-ago period

KEY HIGHLIGHTS

  • Top three passenger vehicle makers - Maruti, Hyundai and Tata - led the upturn with 21.3%, 19.7%, and 154% growth, respectively
  • Industry volumes are estimated to have crossed 2.3 lakh units during the month, a 20% growth over last August
  • Growth is on the low base of last year when sales had declined by 31.6% over August 2018
  • It also indicates aggressive inventory build up at dealerships in anticipation of higher retail sales during the upcoming festive season in October and November

Barely 24 hours after India reported its worst economic performance in a quarter, the domestic automobile sector showed signs of a strong revival with a 20 per cent growth in dispatches of passenger vehicles in August over the year-ago period.

The numbers are on a low base of last year when industry volumes had declined by a massive 31.6 per cent, which was then a record fall for a month. Yet, it builds on a rebound that has been visible in the months of June and July as well.

Market leader Maruti Suzuki reported a 21.3 per cent growth in sales and breached the psychological 100,000 unit mark for the first time since February, which was also the last non-COVID month. In percentage terms, this was Maruti's best month since June 2018.

ALSO READ: Maruti sees 21.3% growth in August, wholesale dispatches cross 1 lakh for first time since February

Arch rival Hyundai matched the Japanese car major's performance with a 20 per cent increase in dispatches at 45,809 units in August 2020 against 38,205 units in August 2019. In relative terms, Hyundai's performance was even better as it was its highest tally in a month since October 2019, which was a festive month and when it had sold 50,000 units. The showstopper was Tata Motors which buoyed by new launches like the Harrier SUV and Altroz premium hatchback, witnessed a 154 per cent jump in sales at 18,853 units.

The improved performance signals a stabilisation of production which was disrupted due to the lockdown in April as also build up of inventory in the run up to the festive season that starts next month. Outside of the top three manufacturers however, the going is still not silky smooth.

While new entrants Kia Motors and MG grew in high double digits on their relatively smaller base and Renault continued to reap benefits of a revamped product line-up, the likes of Honda, Toyota, Ford, Volkswagen and Skoda were still in the red. Homegrown Mahindra and Mahindra also could only match the tally of last year.  

"At Mahindra, we continue to see good recovery in demand both for SUVs and pick-ups in the Small Commercial Vehicles segment. For the month of August, we have registered growth in both SUVs and pick-ups," said Veejay Nakra, Chief Executive Officer, Automotive Division, M&M Ltd. "We have been able to meet the uplift in demand by managing the supply chain challenges and going forward will continue to keep our focus on it."

Despite launching the next generation version of its bestselling sedan City, Honda saw a 9.4 per cent decline in sales though it took heart from a month on month (sequential) increase.

ALSO READ: Mahindra & Mahindra auto sales decline 16% YoY in August, tractor sales up 65%

"A quarter into the unlock phase, we are progressing as per our plan, both in terms of supply and demand registering a sequential growth of 39 per cent over July'20. As we ramp up our daily production to 100 per cent pre-COVID level this month, we are optimistic about the upcoming festive period and expect demand to improve further," said Rajesh Goel, Senior Vice President and Director, Marketing and Sales, Honda Cars India Ltd. "However, considering that COVID-19 cases are constantly on the rise, we need to continuously monitor overall buying sentiment and its impact on auto sales going forward."

The stop-start nature of the lockdown impacted the fortunes of Toyota, which saw a steep 48 per cent drop in sales. In its defence, the company said it has done better in retails - though it did not reveal those numbers, and its wholesale was due to lower production at its factories.  

"August had also witnessed a steady rise in retails (sales from dealer to customers) and thanks to 'Toyota pull system' of operations, we are happy that we could squeeze the system inventory to sell much higher to customers despite the production constraints. Thereby helping us clock 25 per cent higher retails when compared to the wholesales (sale from TKM to dealers) this month and also resulting in better inventory management at dealerships," said Naveen Soni, Senior Vice President, Sales and Service, Toyota Kirloskar Motor.

While the overall improved performance of the industry is a cause for cheer, nobody is popping the champagne bottle yet. With coronavirus cases still rising and the state of the economy highly uncertain, that would be premature.

"We would like to carry on with cautious optimism as uncertainty still surrounds the pandemic," said Tarun Garg, director (sales, marketing and service), Hyundai Motor India Ltd.

ALSO READ: Hyundai records 20% growth in domestic sales in August; exports decline

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