Car market ends 2020 festive season on a high

The Indian car market has closed its best ever festive season with retail sales of 1-1.1 million passenger vehicles since August.After recording the highest ever dispatches in October, the industry is likely to close November with the highest ever dispatches for the 11th month of the year at 2.80-2.85 lakh units, witnessing a growth of 8-9%. Moreover, retail sales are expected to be even better at over 3.1 lakh units - further trimming the inventory in the system to less than one month.The cumulative April-November passenger vehicle sales in FY-21 is estimated to be very close to 1.5 million, a 20% decline from last year, despite losing almost two months of sales and production to the most severe phase of the pandemic.While refusing to confirm or comment on this month’s volumes, Shashank Srivastava , ED, sales and marketing at Maruti Suzuki said the demand during the festive season of 2020 was one of the better ones seen in recent years. And the current offtake in the industry surely has a large element of pent up demand even as the need for personal mobility has brought in new first time buyers.“Post festive demand is still holding at a marginally lower level. This is a little surprising as industry was generally expecting a more significant drop as many sectors in the economy are struggling,” he added.A lesser impact of the pandemic in rural areas combined with sustained rural income has brought in new first time buyers.A significant contribution to this growth has come from states with very low car penetration and is heavily reliant on agricultural growth. A second consecutive strong monsoon, in tandem with higher minimum support prices for crops, has buoyed rural prosperity.If one were to compare last year's festive season with current years, the market saw more than 25% growth.But this year, there was also an extended inauspicious period of Adhik Mas – where the sales continued albeit on a low pace, which added to the volumes. In 2019, festive period (17th Aug- 27th Oct) lasted for 71 days compared to 89 days this yearFrom the beginning of Onam and Ganesh Chaturthi i.e. mid-August to mid-November, retail sales have been close to 9 lakh units versus close to 7.4 lakh units sold in the same period of Onam to Diwali last year, according to industry sources.This is the fourth month in a row passenger vehicles grew after nine months of consecutive decline. The favourable base impact is expected to drive growth of the Kia Motors and Tata Motors with growth ranging between 50-100%.Shailesh Chandra, president of passenger vehicle business unit at Tata Motors told ET, the company’s passenger vehicle business witnessed 93% growth in bookings and 80% growth in retails.Global automotive forecasting firm IHS Markit had to revise the forecast several times for 2020 due to better than expected demand. The Indian market output has been revised by 3 lakh units or more on the higher side since the unlocking activities were initiated.“Since August we have been revising our production forecast on the higher side in anticipation of a strong festive season and the industry delivered better than planned. The production schedule for the rest of the year too looks good. From an estimated decline of 35%, our forecast for 2020 is now seen down by 25% for light vehicles,” said associate director at IHS Markit, Gaurav Vangaal.However Srivastava cautions that the pent up demand may be tapering down and fresh offtake has to kick in beyond the pent up demand.The sales pattern reveals that the higher growth witnessed in the Navratras period had become somewhat benign to marginal growth in the Diwali period.Non committal on the future numbers, Srivastava added “that long term demand pattern is closely related to the Covid sentiments and the fundamentals of economy. Since there is uncertainty on these factors, one will have to see sustenance of demand beyond December.”The industry’s dispatches is estimated to have grown by 9% year-on-year to 280,000 to 285000 units in November 2020, while the retail volume — the end user sales to vehicle buyers — is estimated to be between 3.1-3.3 lakh units for the same period.A senior sales head of a leading automaker said since the inventory of automakers has dropped below normal level due to higher retail volume in November, suggesting wholesale growth outpaced retail in December even if inventory level achieves normalised level.“This has been the main reason the production schedule of automakers in December remains strong despite being a lean season,” added the executive requesting anonymity.

from Economic Times https://ift.tt/2HPgECx