Auto volumes reported by OEMs were largely impacted by the COVD-19 second wave-led restrictions in various states. Among the major categories, the export of 2Ws and domestic tractor segments reported strong performance.
Passenger Vehicles: Strong Recovery Expected
The volumes of domestic passenger vehicles declined sharply in May 2021. This was due
to the several restrictions in various states, which led to supply-chain constraints.
Maruti’s total volumes declined by 71% MoM in May 2021, led by steep declines across segments. Tata Motors and Hyundai Motors' domestic volumes also declined by 40-49% on an MoM basis. Also, M&M’s total volumes declined by 56% on an MoM basis in May 2021.
Despite this setback, the PV industry is expected to recover strongly once restrictions are lifted. Most of the companies have lower inventory levels. Order books are also high as customers postponed the purchases.
Two-Wheelers: Buoyant Export Markets
The demand for two-wheelers remained muted in May due to the restricted mobility. Bajaj Auto and TVS Motor’s total volumes declined by 30% MoM. While Hero Moto and Royal Enfield volumes were down by 49-51%. Yet, the industry received partial relief from the export market, arresting the volume slide to an extent.
The pain is likely to extend in this industry even post ease in restrictions as dealer inventory continues to remain at higher levels.
CV Momentum Arrested Post April
The commercial vehicles segment was witnessing a strong recovery until March 2021, with strong growth in freight volumes and high truck utilization levels. The industry lost momentum post that. This was due to the various restrictions in states that hampered economic activity. Tata Motors' total CV volumes declined by 32% MoM and Ashok Leyland's total CV volumes declined by 62% MoM.
Truck rentals declined by 23% on an MoM basis in May 2021. With that, fleet utilization level came down to 35-40%. Going forward, demand recovery is expected to be slow in this segment.
Tractor Volumes Recovered Before the Kharif Season
Tractor volumes in May were better than expectations. There was a strong recovery in the last few days of May, as farmers started preparing for the upcoming Kharif crop season. M&M tractor volumes declined by 12% MoM, whereas escort volumes declined by 8% MoM in May 2021.
The expectations of a normal monsoon and record-high cultivation targets should support tractor demand going forward. Inventory levels are almost at normal levels now, which should act as an added tailwind.