Demand for automobiles continued to remain strong as the industry reported strong volumes in March on a yearly basis. However, given the lockdown impact of last year, a monthly comparison is a more appropriate tool to analyze the March numbers.
PV Volumes Remained Firm in March:
Given the renewed focus on health and hygiene, more commuters are opting to travel by personal vehicles. Hence, demand has remained conducive in the passenger vehicle (PV) segment.
Maruti Suzuki reported volume growth of 1.54% MoM in March 2021. Models like Swift, Dzire, Ertiga, and Brezza were available on waiting periods due to the higher demand. Maruti has also started production at a third line in its Gujarat plant. It is a clear sign that the company is expecting strong demand in the coming months as well.
The rising number of COVID cases did not have any impact on sales in March 2021. However, it is the single biggest risk factor that could affect the demand in the future. Maruti has also announced to take a significant price hike in April due to a sharp rise in input costs. Going forward, it is also likely to hurt consumer sentiments.
M&M and Tata Motors' PV volumes also grew on a monthly basis. M&M reported a 25% MoM growth in volumes. Tata Motors' PV vertical reported a 50% MoM growth in March.
As per the Kotak Institutional report, the PV makers have managed the semiconductor shortage issue quite well. M&M was the most impacted by it as it is heavily reliant on a single vendor. However, the company is now focusing on diversifying vendors.
Mixed Trends for Two-wheelers:
Among the two-wheelers, HeroMoto and TVS reported growth on a monthly basis. Bajaj Auto and Royal Enfield reported a minor decline.
Hero reported a 14% MoM growth in volumes while TVS reported an 8% increase. Bajaj Auto export volumes declined by 0.7%, on an MoM basis. Royal Enfield's volumes also declined 5.2% MoM.
CV Demand Above Expectations, Tractor Volume Remains Impressive:
Commercial vehicle (CV) volumes have increased above expectations in March. The MoM growth is aided by strong freight volumes and high truck utilization levels. Fleet operators have increased the freight rates in the past few months. It has helped to mitigate the rising fuel cost.
Light commercial vehicles continue to clock impressive growth. Heavy truck volumes have also recovered sharply with economic recovery. The state and central governments have so far resisted imposing fresh lockdown despite the rising number of COVID cases. It is an encouraging factor for the CV industry. However, any fresh restrictions on movement can severely hamper the industry's prospects.
Tractor volumes have also remained positive with the industry clocking 10% MoM growth. Going ahead, a strong rural economy coupled with a good rabi harvest is expected to support demand for tractors.