The auto original equipment manufacturers (OEMs) saw recovery in July 2021, helped by strong pent-up demand post reopening of the economy and a lower base effect. Numbers across all vehicle segments were encouraging in July, except for domestic two-wheelers.
Passenger Vehicles in a Fast Lane
The demand for passenger vehicles is particularly impressive post-second COVID-19 wave as pent up demand has picked up. And, the numbers are telling the story.
Maruti Suzuki’s total volumes increased by 50% YoY in July 2021. Hyundai Motors domestic volumes increased by 26% on a YoY basis. Tata Motors and M&M also reported domestic volume growth of 91-101% on a YoY basis in July 2021.
Vehicle manufacturing has hit a roadblock due to the shortage of semiconductors. It has increased the average waiting period post-booking. Despite that, the cancellation ratio is very negligible, and dealers are reporting strong booking trends.
Below Par Domestic Demand for Two-Wheelers
Two-wheelers' story can be best explained through the numbers of HeroMoto MotoCorp. Its total volumes declined by 13% YoY in July 2021. The company sold 4,54,398 units against 5,20,104 units during the month.
HeroMoto is the largest two-wheeler company with the highest share. In good times, it regularly achieved monthly sales of over 7 lakh vehicles. And current sales numbers are below par from that benchmark. It signifies weak demand for two-wheelers in the domestic market.
The same was the story for Bajaj Auto and TVS Motors, who witnessed the muted domestic performance. However, strong demand from export markets came to their rescue. Bajaj Auto's export volumes more than doubled while that of TVS Motors grew by 65% YoY in July. Royal Enfield volumes increased by only 9% YoY in July 2021, possibly due to the semiconductor shortage faced by the company.
CVs: In A Sustained Recovery Mode
The recovery is sustaining in commercial vehicle (CV) space aided by increasing economic activities, construction, infrastructure and road projects. In July 2021, CV volumes for Tata Motors and Ashok Leyland increased by 88% and 81% YoY, respectively. Volvo Eicher also reported strong numbers with 96% YoY growth in volumes during the month.
Monsoon Slowdown Affects Tractor Demand
Tractor volume growth moderated under the impact of high base and prolonged delay in monsoon activities. M&M tractor volumes increased by 7% YoY, whereas Escorts’ volumes increased by 23% YoY in July 2021.
However, the monsoon has now caught up, and sowing has also picked up pace in the past few days. Also, an increase in MSP rates for key Kharif crops and continued strong government support for all agricultural activities augurs well for the industry.
Among passenger vehicles, bookings trends are strong, but it needs to sustain in coming months to build up a sustained recovery. Shortage of semiconductors could play a roadblock to achieving desired volumes. The domestic two-wheeler market continues to remain vulnerable, likely impacted by the rising prices of petrol and diesel.
Commercial vehicles have continued their sequential recovery. Volume sustainability in the coming months is directly related to recovery in economic activities. While tractor demand is expected to recover after a blip in July as the monsoon has revived again.
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