REVIVING ECONOMY 4: Faster auto uptake triggers hope of early economic revival

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BY ROHIT VAID
New Delhi, Oct 8 (IANS)
Healthy rise in automobile month-on-month sales has lighted up hopes of a steady pick-up in overall economic activity.
Industry insiders cited the nil to double digit sales pickup in the last four months as ‘green shoots’ of a slow-but-steady rise in economic activity.
Considered as a discretionary spend, the trend in car purchases have shown a sustained uptick both on retail and wholesale basis.
According to the Federation of Automobile Dealers Associations data, on a yearly comparison, passenger vehicles retail sales in September grew by 9.81 per cent to 1,95,665 units from 1,78,189 units off-take during the like month of last year.
In terms of the commercial vehicle (CV) segment, which represents the broad health parameters of an economy, there has been month-on-month improvement, analysts said.
The trend, they said, showed a steady influx of transportation orders, easing of Covid-19 restrictions and increased construction activity across the country.
However, on a YoY basis, CV sales remained deep in the red.
Nevertheless, tractor and two-wheeler sales have been unfazed by the downturn brought around by the pandemic.
As per the September retail data, tractor sales grew by 80.39 per cent to 68,564 units from 38,008 units sold during September 2019.
This trend is also corroborated through the volume growth in fertilisers and consumer non-durables.
“From a virtual zero level (in April), only few hundred passenger vehicles were produced and sold primarily to cater to exports of activity in the first month of this FY, moving to a double digit growth in September is a clear indication of pickup in economic activity even if one were to look at the September growth over a low base in the previous year,” said Sridhar V, Partner, Grant Thornton Bharat LLP.
“Fuel sales having reached pre-lockdown levels is also strengthening that view. While the reasons for growth vary from pent-up demand, new introductions, rural growth, good monsoon leading to positive outlook, and the onset of festive season are expected to keep the trajectory steady in the next month as well,” he added.
In September, base effect along with a rebound in domestic demand led major automobile players to report healthy year-on-year and sequential sales numbers.
Analysts pointed out factors such as healthy monsoon, pent-up demand and preference for personal mobility over public transport due to the pandemic as the other key reasons for the upswing.
“Month on month recovery in auto sales is driven by inventory stocking by OEMs ahead of the festive season, pent-up demand post Covid induced disruption, healthy demand from rural areas thanks to healthy agri trends and shift in trends towards personnel mobility,” said Shamsher Dewan, Vice President, ICRA.
“We are cautiously optimistic about the upcoming festive season as demand from the rural sector remains healthy. Entry level motorcycles and passenger cars are doing well. There is gradual recovery in CVs as well. Expect LCVs to do better,” Dewan added.
Last month, the Society of Indian Automobile Manufacturers’ data showed that a total of 2,15,916 passenger vehicles were sold in the domestic market, representing a rise of 14.16 per cent from the 1,89,129 units sold during the like period of 2019.
Similarly, the data showed a sequential growth in sales during August.
In July, the domestic passenger vehicles’ sales had declined by 3.86 per cent to 1,82,779 units from 1,90,115 units sold during the corresponding month of the previous year.
Besides, the data showed that car sales in the country rose by 14.13 per cent to 1,24,715 units in August, compared to 1,09,277 units sold in the year-ago period.
However, the data do not include sales figures from some key players such as Tata Motors.
Sales in the two-wheeler segment showed growth during the month under review.
The off-take of two-wheelers, which include scooters, motorcycles, mopeds and electric two-wheelers, edged higher by 3 per cent to 1,559,665 units in August from 1,514,196 units sold during the corresponding period of last year.
Experts said this trend will only get strengthened during the festive season.
“Even though several high-profile launches have been pushed to FY22, dealer stockyards are now stocked with fresh BS6 vehicles in light of the impending festive seasonal sales. With a steady unlocking of the economy near the festive season and the continuing relevance of the personal mobility factor, the footfalls at the dealerships are expected to increase and translate to moderate YoY volume growth in the personal vehicle and two-wheeler segment,” said Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research.
“But longer-term sustainability of such short-term growth will depend on an overall recovery of the economy over the next few quarters,” Chowdhury added.
Associate Director at India Ratings and Research, Shruti Saboo, said: “The commercial vehicles sales volumes, especially medium and heavy commercial vehicles, which depend on industrial production, are still subdued. While key macroeconomic indicators like IIP growth, fuel or power consumption, and railway freight traffic have shown recovery from the lows recorded in April-May 2020, complete revival is likely to take longer.”
“The festive season is likely to record improved sales on a monthly basis. However, the year-on-year numbers would still be lower as affordability of consumers is affected. Also, the festive season this year is spread over more months compared to last year,” Saboo added.

(Rohit Vaid can be contacted at rohit.v@ians.in)

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