New Delhi: The ongoing Covid-19 second wave has resulted in a near washout of sales in May 2021 for the automotive industry. During the depths of the second peak of Covid-19 in the summer, sales of new vehicles collapsed as auto plants and many dealers were forced to close down.
Many of the top automakers that reported monthly sales on Tuesday said the weeks of pandemic-forced plant closures hit them hard. The economy is facing turmoil and sales were also dampened by job losses eroding spending power and by the work-from-home policies eliminating the need for travel.
Despite healthy order-books for most of the OEMs, the industry leaders Maruti Suzuki, Hyundai Motor and Tata Motors reported a sharp drop in passenger vehicle sales on sequential basis due to supply chain constraints caused by localised restrictions and shortage of semiconductors.
During the month under review, almost all OEMs had stopped production, advanced their annual plant maintenance schedules or operated at limited capacity to make better use of the lockdown period.
Maruti Suzuki posted a pandemic-fueled 75% decline in domestic wholesales at 35,293 units last month compared to 1,42,454 units in April. The carmaker shut production from May 1 to 16 to divert oxygen for medical use.
“In May 2020 also the company witnessed production disruption owing to lockdowns. Since neither of the two months had normal production, the May 2021 volume is not comparable with that of May 2020,” Maruti Suzuki said in a statement.
Hyundai dispatched only 25,001 units last month as against 49,002 units in April, down 49%.
Mahindra & Mahindra said its domestic passenger vehicle sales fell to 8,004 units in May from 18,285 units in April 2021, down 56%.
Tata Motors passenger vehicle sales in the domestic market were at 15,181 units in May with a drop of 40% from that in April this year.
Passenger vehicles seem to have performed better than the other segments on the strength of a sustained demand momentum and inventory buildup. Analysts expect that car buyers may bounce back after an extended shutdown, which would help the auto industry to recover.
Domestic sales of carmakers in m-o-m baisis
| OEMs | May 2021 | April 2021 | %Change |
| Maruti Suzuki | 32,903 | 137,151 | -76 |
| Hyundai Motor | 25,001 | 49,002 | -49 |
| Tata Motors | 15,181 | 25,095 | -39.5 |
| Kia India | 11,050 | 16,111 | -31.4 |
| M&M | 8,004 | 18,258 | -56.2 |
| Renault India | 2,620 | 8,642 | -69.7 |
| Honda Cars | 2,032 | 9,072 | -77.6 |
| Nissan Motor | 1,235 | 3,369 | -63.3 |
| MG Motor | 1,016 | 2,565 | -60.4 |
| Ford India | 766 | 5,469 | -86 |
Source: Industry data
Two-wheelers
The deeper and wider penetration of the Coronavirus infection in the rural areas this time eroded the revival prospects of the two-wheeler segment. The segment continued to witness stress in the domestic sales. For some of the OEMs, including Royal Enfield and TVS Motors, exports became helpful and they performed better than others. Such companies are also relatively well-placed to navigate slowdown in the domestic markets and to outperform peers.
Hero MotoCorp faced disruption in production as operations at all of its manufacturing facilities across the country remained shut between April 22 to May 16. After following the respective state guidelines, the company opened three of its plants in Gurugram, Haridwar and Dharuhera and resumed single-shift operations on May 17, followed by the other three in Neemrana, Halol and Chittoor on May 24.
The vintage bike maker, Royal Enfield, posted 20,073 motorcycle sales in May, against 48,789 sold in April this year. Its domestic sales grew by about 60% to 7,221 units last month on a m-o-m basis.
Among the other players, Bajaj Auto and the Chennai-based TVS Motor reported 52% and 60% m-o-m decline in the domestic market to 60,342 units and 52,084 units respectively.
Commercial vehicles
Weak economic activity, lower freight availability and relatively restricted financing environment once again depleted the sales of the commercial vehicle (CV) players who were hoping to see green shoots in Q1 FY22.
Sales of Tata Motors and Ashok Leyland, the top two CV companies, crashed 35% and 62% m-o-m in May respectively.
During last month fleet utilisation declined to 65%-70% during the month largely due to lower movement of non-essential goods. According to a recent report by Prabhudas Liladher, new vehicle sales came under pressure as the financing turnaround time increased. “Due to unavailability of a moratorium option, many fleet operators are demanding loan restructuring. As a result, financiers have become more selective,” analysts at the brokerage firm said.
Outlook
Automakers are counting on a rebound towards the mid of Q2 and foresee strong growth in the second half with easing of lockdown and the support of pent-up demand. Those hopes rest in large part on the expectation that the distribution of Covid-19 vaccines will accelerate in the coming months after a slow start in the recent weeks.
“Auto sales figures for May are a one-off as large parts of the country were under some form of lockdown to mitigate the Covid impact which also led to most auto OEMs taking planned shutdowns and maintenance of units. With Covid restrictions easing, we believe June will witness healthier numbers and the sector will be back to normal in July,” Munish Aggarwal, director, Equirus Capital, said.
Forecasters also expect that widening vaccination rates and restart of economic activities should enable consumers and businesses to return to a more normal range of activities, lifting the job market, consumer sentiment and auto demand.