Anticipation of strong festive season growth boosts automobile sales in August

Key highlights:

• Inventory build-up at the dealerships for the festive season was behind growth in August
• Dealerships are anticipating high sales in the upcoming festivals such as Dusshera and Diwali festivals in September and October
• Biggest surprise was the robust growth in commercial vehicle sales

The wholesale automobile sales for the month of August was strong across all segments. This was given to the inventory build-up at the dealerships for the festive season. With a good monsoon season seen across the country these dealerships are anticipating high sales in the upcoming festivals such as Dusshera and Diwali festivals in September and October.

Last year the inventory build-up was seen in the month of September as these festivals coincided in the month of October.

Passenger vehicle (PV) sales in August continued to rise in anticipation of a strong festive demand ahead.

Companies such as Maruti Suzuki, Honda Cars, Tata Motors and Hyundai Motor posted a good growth during the month. While Maruti Suzuki saw its growth rise to 26.7%, Honda Cars grew by 25%, Tata Motors posted a 10% growth and Hyundai saw a 9% growth.

Their sales was driven mainly on the back of new launches. For instance, Maruti Suzuki's growth was driven by Baleno, Vitara Brezza and new Dzire. Tata Motors' PV sales was led by new launches Tiago, Tigor and Hexa.

“Good monsoon, rural demand revival and festive season will drive demand in the coming months,” said analysts Sneha Prashant and Abhishek Kumar Jain in a HDFC Securities report.

The two-wheeler sales too clocked in double-digit growth during the month of August on strong demand from rural areas and government employees due to the 7th Pay Commission remuneration, said an Emkay Global research report.

Two-wheeler companies such as Honda Motorcycles, Royal Enfield, TVS Motor, Hero MotoCorp and Bajaj Auto posted a growth of 26%, 22%, 16%, 10% and 1%, respectively during August.

Going ahead, a good monsoon and revival in the rural economy, especially in UP, which is the largest market for two-wheelers, with a share of 14%, will be the key growth drivers.

However, the biggest surprise was the robust growth in commercial vehicle (CV) sales. This was supported by a double-digit growth in both light commercial vehicles (LCVs) and medium and heavy commercial vehicles (MHCVs).

Tata Motors' CV sales posted a 22% growth in sales to sell 28,688 units. This was due to a 39% growth in MHCVs as the company sold 13,823 units during the month. This was a great improvement for the company which has been seeing its market share slip away.

Ashok Leyland's sales too grew by about 23%, led by growth of about 25% in MHCVs. Meanwhile, the VECV sales grew by 9% to 3,868 units.

Tractor sales were upbeat, with Escorts and Mahindra domestic tractor volumes surging by 20% and 24%, respectively..

This high growth in the CV segment was due to pick-up in the infrastructure segment and freight rates as fleet operators' utilisations improved. This boosted demand in the MHCV segment with Tata Motors and Ashok Leyland, being the leaders.

“Over the next few months, we expect recovery in MHCV volumes to gather pace with pick-up in economic activity and pent up demand,” said the HDFC Securities analysts.

ALSO READ:

• Car manufacturers post mixed sales in August; CV sales make big recovery
• Retail car demand remains muted in August despite wholesale sales build-up for festive season
• Maruti Suzuki posts 15.5% rise in car sales in May