Diwali blitz: Car companies ramp up production to match steps with retail sales

Mumbai: Automakers have stepped up production, as dealerships are running low on stock ahead of Diwali after they retailed more cars and SUVs in October than what the manufacturers supplied.The passenger vehicle segment is upbeat about demand this month as well, but not so confident about the market beyond the festivals as uncertainty due to the pandemic continues to shroud the economy. In the two-wheeler segment, which was the first in the automotive sector to bounce back from the Covid-induced slump, retail sales last month have at best been flat as pent-up demand started to taper off, and industry insiders warned that this could happen to the passenger vehicle segment as well after the festive season.Industry estimates put retail sales of passenger vehicles in October at 365,000-370,000 units, the third highest on record for a month and about 40,000 more than the 330,000 units dispatched by automakers last month.79031899Wholesale, Retail Numbers UpBoth wholesale and retail numbers have grown in double digits from a year earlier.That has left inventories at dealers enough to meet just 20 days of sales at the beginning of November, ahead of the peak sales season around the Diwali and Dhanteras festivals, industry executives said. A month prior, they had 45 days of inventory.Industry executives and experts said many people who had delayed the decision on purchasing a vehicle during the early days of the pandemic are returning to the market as the festive season is on and worries over job loss have eased. There is also continuing demand for personal mobility in the time of social distancing. Still, the October performance has surprised many in the industry.“Everyone was expecting a good October, but not a lot of people expected it to be this good,” said Shashank Srivastava, industry leader Maruti Suzuki’s executive director for sales and marketing. “It is a great confidence booster for the network that stock is low and bookings and deliveries are keeping pace.”Festive PeriodThe 45-day festive period in India is divided into three blocks — the first nine days of Navratri constitutes 30-35% of the total sales for the auto industry, followed by the period between Navratri and Diwali that accounts for 25-30% and 6-8 days around Diwali when 35-45% of the total festive sales happen.In October this year, Navratri and Dussehra saw retail sales of around 200,000 units, according to industry estimates. Last year, the festivities of Navratri, Dussehra and Diwali-Dhanteras were all in October. This year, Diwali is in November and automakers expect the momentum to continue into this month as well.With a large chunk of buying to happen during Diwali and Dhanteras, Maruti Suzuki has revised its production schedule by 7,000-8,000 units more in November. This will, however, be calibrated in December, said people in the know.Maruti Suzuki’s management in a post-earnings call said the company was operating at almost peak capacity. The company believes visibility of demand is quite strong till December 2020, but it doesn’t have much clarity beyond that as of now.Demand may Taper OffSrivastava of Maruti Suzuki said there was no metric to prove how long the pent-up demand would last. “The sustained bookings and deliveries and resultant lower stock indicate that there should not be a problem till December. But what happens post December, no one can predict,” he added.The strong performance in passenger vehicle sales has come at a time when the two-wheeler market has started seeing pent-up demand tapering off. According to several people in the know, two-wheeler retails in October were 1.8 million units. There is a big concern of piled up inventory as well, even as manufacturers hope Diwali and Dhanteras deliveries might be higher.While the segment’s lacklustre Navratri-Dussehra retail performance surprised many, an industry executive said passenger vehicle makers too could soon face this “air pocket”.

from Economic Times https://ift.tt/3epdsJz