Lockdowns put auto sales in slow lane in May, Maruti takes 71% hit

The lockdowns and curfews across states have severely hit automobile sales--a key benchmark to assess economic performance. The country’s largest automaker Maruti Suzuki saw its sales decline by 71 per cent in May compared to April. The second wave of Covid-19 forced Maruti and many of its peers to shut down factories. The move was meant not just to keep their employees safe but also to comply with the government mandate of restricting use of medical-grade oxygen for non-medical purposes. While carmakers don’t use a lot of oxygen in their manufacturing processes, it is used i.....
The lockdowns and curfews across states have severely hit automobile sales--a key benchmark to assess economic performance. The country’s largest automaker Maruti Suzuki saw its sales decline by 71 per cent in May compared to April.

The second wave of Covid-19 forced Maruti and many of its peers to shut down factories. The move was meant not just to keep their employees safe but also to comply with the government mandate of restricting use of medical-grade oxygen for non-medical purposes. While carmakers don’t use a lot of oxygen in their manufacturing processes, it is used in large quantities by some auto component makers.

However, with the number of cases dropping in major metro cities, car company executives expect a gradual unlock and a change in fortune in June. But, spread of the disease in rural areas is likely to have a prolonged impact on two- wheeler sales. Typically, a bulk of two-wheeler sales come from the hinterland.

“What happens next depends on the number of Covid-19 cases and the geography of the spread since this time it has impacted rural areas as well. However, there are fewer negatives this year compared to last year since the industry is not completely shut, vaccines are here and there’s still a trend towards personal mobility,” Shashank Srivastava, Executive Director, Maruti Suzuki, said.


The auto sales numbers also reflected the caseload in a particular state or city. Toyota, which has factories based out of Karnataka (one of the worst hit states), could only sell 707 units in May.

Last month, there was no production at the plants in Bidadi and there were minimal sales because of the restrictions and sporadic lockdowns in different parts of the country, said Naveen Soni, senior vice president at Toyota Kirloskar. “But we anticipate recovery as we have a very healthy number of pending orders. We will be able to take a better stock of the situation once the restrictions are relaxed,” said Soni.

The rural India impact is evident in the case of tractor & two wheeler makers that counts rural India as their primary market. For instance,  Mahindra & Mahindra’s tractor sales fell 12.13 per cent in May to 24,184 units  from 27,523 units sold in April. “In May, Covid spread in rural markets led to stringent lockdowns, leading to deferment of tractor purchase and limited operations at dealerships,” said Hemant Sikka, president of farm equipment sector at the company.

Largest two-wheeler manufacturer Hero Motocorp's sales dropped 50.83 per cent in May whereas Bajaj Auto's sales fell 30 percent as compared to April.

"With the vaccination drive gaining pace and a sharp decline in the number of Covid-positive cases, markets across the country are expected to open up gradually. This will aid in the swift recovery of businesses in the coming weeks," Hero said.

The company sold 183,044 units of two-wheelers in the month of May 2

However, Sikka expects a recovery as farmers have started preparing for the upcoming kharif season aided by a good sentiment of a bumper ravi harvest and normal monsoon.

Top brokerages believe a quick recovery is round the corner as pent-up demand would translate into sales once lockdowns are relaxed. “We expect a swift recovery in volumes from the second quarter due to easing of lockdowns and pent-up demand. Our positive view on the auto sector is underpinned by expectations of a strong cyclical upturn, which is expected to last at least three years,” analysts at Emkay Global said in a report.



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