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Automobile saw healthy YoY jump on easing chip shortage, new launches, and upcoming festive season

According to domestic brokerage firm Motilal Oswal, overall auto sales in August were predicted to rise YoY, with passenger vehicles (PV) and commercial vehicles (CV) leading the sector, followed by two-wheelers (2W) and three-wheelers (3W). Tractor sales, on the other hand, were predicted to be flat on a MoM and YoY basis.

In August 2022, the same was true for the majority of 4W and 2W manufacturers. Domestic passenger vehicle dispatches increased 26% YoY in August to nearly 390,000 units, as automakers ramped up production to stock dealerships ahead of the festive season. Furthermore, PV wholesales are improving due to increased semiconductor supply, while CV demand remains stable. This is also the sharpest YoY growth seen in the current fiscal with the exception of May when the growth came on last year’s low base, overall auto sales in August were predicted to rise YoY.

Although on a low base, sales at two-wheeler enterprises also surged in August YoY as companies delivered more vehicles in advance of the holiday season. The companies were able to produce more due to the subsiding chip shortage. So, let’s now closely analyse the August 2022 automobile sales data of seven largest 4W manufacturers and five largest 2W manufacturers in India that has recently released their sales data on 1st September 2022.

4W manufacturers, overall auto sales in August were predicted to rise YoY, while most of them have seen a decline in MoM sales

August shipments at the country’s largest carmaker Maruti Suzuki grew 26.4% YoY to 1,65,173 units, 5.6% YoY to 49,510 units for Hyundai Motor India, and 41.1% YoY to 76,479 units for Tata Motors. Mahindra & Mahindra’s utility vehicles output grew 93% YoY to 59,049 units. While Honda was the only car manufacturer among these seven manufacturers which saw a YoY decline in monthly sales in August 2022.

For several automakers like Mahindra, Skoda Auto India, and Tata Motors, wholesale dispatches of passenger vehicles in August were at or near record high levels.

The reason for such YoY rise could be associated with easing chip supply and upcoming festivals, but there was some degree of effect which is associated with low base covid affected sales figures. Therefore, to have a more realistic comparison, let’s look at their MoM sales comparison.

Maruti Suzuki again saw a 15.6% MoM increase in their August 2022 sales, which was followed by a 5.16% MoM sales increase in M&M. While for the rest of them including Tata Motors and Hyundai, they saw a 6.4% and 1.9% MoM decline in their Aug-22 sales.

Retail sales are falling behind, despite an improvement in dealership inventory. As supply bottlenecks disappear, it is anticipated that vehicle production would significantly increase in the second half of the current fiscal year. For several manufacturers, this might result in a year of record output. Currently, the industry has 700,000 passenger vehicle orders that are still unfulfilled.

2W manufacturers’ overall auto sales in August were predicted to rise YoY and MoM basis in August 2022

Hero MotoCorp, a former Honda partner, has held the top spot in terms of two-wheeler sales in the nation for a considerable amount of time. And as of August 2022, the business has sold 462, 608 bikes and scooters, maintaining its supremacy in the Indian two-wheeler sector. Honda Motorcycle and Scooter India (HMSI), in contrast, isn’t far behind as the manufacturer was able to report a total retail sale of 462,523 units on August 22, which is just 83 units short.

In Aug-22 both two-wheeler manufacturers were able to report good sales. Hero MotoCorp also managed to increase its sales from 453,879 units in Aug-21 to 462, 608 units last month, while Honda saw a 7% increase in YoY sales after previously shipping 431,594 units in Aug-21. Royal Enfield also saw a solid 61% increase in sales last month, selling 62,236 units in August 2022, compared to 38,572 units sold in August 2021. Lastly, Bajaj and TVS Motors also saw decent YoY growth in their sales numbers in August 2022.

Whereas coming onto the MoM change in sales numbers of these two-wheelers manufacturers, all of them saw again saw an MoM increase in August sales. This has been supported by constantly easing chip supply and an increase in demand with a good monsoon.

Electric 2W sales saw an upsurge with increasing competitiveness

Hero Electric and Okinawa engaged in a competitive war for the electric two-wheeler market in July, but Hero Electric emerged victorious with 10,476 new registrations versus Okinawa’s 8,554 in the same month. While new registrations increased MoM for both firms, Hero Electric’s growth (17% over last month’s 8,953) was more than Okinawa’s (5.7% over last month’s 8,094).

Bajaj, the other established brand in the electric two-wheeler market, fell slightly behind, selling 2,554 units of the Chetak in August (as per industry sources). In terms of sales, the Chetak and iQube have previously been fairly evenly matched, however, TVS seems to have gained the upper hand following the iQube’s current redesign. This is demonstrated by the fact that the company only sold 649 iQubes in August of last year, but this time around they sold 581 percent more.

Our View:

Sales are anticipated to stay strong in the upcoming months with the arrival of the festive season, which normally boosts demand. Ahead of the festive season, auto companies generally step up the demand.

The 10-day Onam festival in Kerala and the widely observed Ganesh Chaturthi in Western India marked the beginning of the festival season at the end of August. Diwali in the North and Central areas was then celebrated in October and November. Therefore, nearly a quarter of the annual sales in the Indian automotive industry occur during this period. So, in the weeks leading up to the festivities, automakers often increase their supply levels to meet this demand.

Shashank Srivastava, executive director of sales at Maruti Suzuki expects the industry to end fiscal 2022-23 with a record 3.7 million units, which would be almost 21 percent more than FY21. Therefore, stocks in the automobile sector like TVS Motors and Maruti Suzuki may be the next good investment for investors in the following quarter.

Also Read – https://www.zippiblog.com/how-to-fix-quickbooks-error-code-179-verified-solutions-2022/

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