Lockdowns, rising cases hit auto sales

Mumbai: AUTO sales in April have started showing the impact of lockdowns that has put the brakes on the recovery of the sector, a report said on Tuesday.

With more States announcing lockdowns and some more OEMs expecting to go for maintenance shutdowns, as many as 50 per cent of the dealers are likely to be impacted by the move, it added. However, the full-year prospects remain positive if the Covid wave recedes in the April quarter and the vaccination drive goes as planned, brokerage firm Centrum said in the report.

The opportunity cost was higher in April as it had a mini-festival period and weddings that fell after Holi. Two-wheeler sales were higher in this period and hence channels were stocked up. However, the lockdowns happened in the States that contributed 25-30 per cent of the sales, it added. Centrum said the passenger vehicle sales started in the month with low inventory and hence stocked up before the production shutdowns in May. The commercial segment was the worst hit and lagged the registrations, indicating low channel inventory now, while tractor sales have also declined sequentially hinting at the pandemic impact in the hinterlands, it said.

"We expect May to be subdued with more States taking lockdowns and as OEMs take maintenance shutdowns," Centrum Broking said. Noting that April was anticipated to be a good month for two-wheelers on the back of mini-festivals at the regional level and marriage season demand in the rural areas, the OEMs had prepared their channels with stock. However, with the rising Covid cases, States like Maharashtra, Madhya Pradesh, Jharkhand, and Delhi started imposing lockdowns as a result of which, the sales of domestic two-wheelers got impacted especially in the lower cc-segments, with month-on-month sales of Hero MotoCorp, Bajaj Auto and TVS Motors declining by 37 per cent, 30 per cent and 35 per cent, respectively, in the domestic market.

Bajaj Auto's management expects 50 per cent of dealers to be shut in May as compared to 30-35 per cent in April on the back of lockdowns, the report said, adding inventories are also higher than normal for the industry. According to Centrum, the passenger vehicles stocks were low at the start of April and production wasn't impacted much in the month.

Therefore, the OEMs took the opportunity to improve the dealer inventories as retails got impacted due to the pandemic. In May, some OEMs have brought forward the mid-year planned maintenance activity and hence production will be lower. Also, as more States have announced lockdowns, retails are expected to be low, it said.