NEW DELHI: Commercial vehicles (CVs) and two-wheelers volumes are likely to report strong sales in August, while tractor volumes may see some seasonal softness, say market experts. Demand for personal vehicles (PVs) might remain strong, notwithstanding supply-side challenges, say the experts tracking the sector.
Dealers are witnessing a strong rise in enquiries and order booking across segments, say analysts, anticipating strong sales in the festive season. But the shortage of semiconductor chips is hurting the sector. These chips are used in almost all vehicles for smooth functioning of powertrains, advanced driver assistance systems and infotainment consoles. They add to the safety and convenience of passengers.
The chip supplies in India are mostly handled by distributors such as Arrow Electronics and Millennium Semiconductors. For mass-market PVs, the chip content stands at $40-50 per vehicle — higher than that of two-wheelers and CVs. That is why analysts anticipate higher supply issues with PVs, especially in the premium categories.
Tata’s Jaguar and Land Rover (JLR) has already said the chips’ shortage would severely impact its production in the September quarter. Even Maruti Suzuki is expected to cut down its August production by 30-40 per cent because of this issue, Sharekhan says.
The brokerage says it expects commercial vehicles sales to recover strongly, followed by tractors, two-wheelers and passenger vehicles, in that order. The shortage of chips is a major concern and is affecting PV production in India and across the world, it adds.
In the personal vehicle segment, Motilal Oswal Securities expects volumes for Maruti Suzuki to grow 2 per cent YoY, Tata Motors 35 per cent and Mahindra & Mahindra 30 per cent. In the commercial vehicle segment, the brokerage sees Ashok Leyland’s wholesale business to grow 72 per cent YoY and that of Tata Motors’ 57 per cent. Tractor maker M&M is seen reporting a 5 per cent volume growth and Escorts 14 per cent.
Analysts say the wholesale business of Bajaj Auto’s two-wheelers will grow at 2.5 per cent and TVS Motor at 6.4 per cent. Hero MotoCorp may see a 10 per cent YoY fall in volumes. The semiconductor shortage is impacting the above-150cc segment’s volumes.
Emkay Global says: “Tractors may see a mixed volume performance in the domestic market, with a 5 per cent YoY decline likely for Escorts and 4 per cent YoY growth for M&M. Escorts is likely to see a volume decline due to the high base, a steep increase in vehicle prices, and some impact on customer sentiment due to monsoon deficiency, in our view.”
The NSE Auto has underperformed Nifty by 12.5 percentage points in 2021, with a broad-based underperformance across stocks. It is up 6 per cent against Nifty’s 18.6 per cent returns.
