While an improvement in car and two-wheeler sales is being seen as a recovery of demand after a long period of economic slowdown, the on-ground reality seems to be different.

Salesman Displaying Latest Sport Bike Model At Hero Automobile Motorcycle GodownImage Credit: Picxy.com/neeraz.chaturvedi
Money Automobile sales Wednesday, November 04, 2020 - 12:54

Two-wheeler makers in India announced bumper sales for the month of October on Monday, with the likes of Hero MotoCorp to Bajaj Auto and Suzuki Motorcycle calling their October sales numbers the “highest ever”. While Hero said it sold over 8 lakh units, Bajaj said its Pulsar bikes recorded sales of over 1.7 lakh units, which is the highest ever for the brand as well. These companies attributed the strong sales to the festive season. Suzuki Motorcycle India said it also had the highest ever domestic sales this festive season selling over 76,865 units in October.

Not just two-wheelers, carmakers too posted healthy sales, with Hyundai reporting its highest ever monthly domestic sales. India’s largest carmaker, Maruti Suzuki India, reported an 18.9% growth in its total sales while Tata Motors saw a 27% growth in sales in October, compared to last year.

While this is being touted as a recovery of demand after a long period of economic slowdown that the country has been facing, the reality seems to be different on the ground. It is important to note that the sales reported by automakers are wholesale numbers, which means that this is what they dispatched to automobile dealers and not what end customers actually bought.

Vinkesh Gulati, president of the Federation of Automobile Dealers Associations of India, says that during the nine days of Navratri that went by in October, compared to last year’s period, there was a slight de-growth in two-wheeler sales while there was a growth in sales of passenger vehicles.

“But for October sales, we’ve to take into account that Diwali and Navratri both fell in October last year, while this year Diwali has been pushed to November. So we were expecting October sales to fall. But we were shocked to see the numbers coming from manufacturers,” Vinkesh adds.

Vinkesh says that this is actually an inventory pile-up that has been created. While automobile manufacturers are building up inventory in anticipation of good sales, industry experts too say that we will have to wait and see if demand sustains beyond December before touting this as a recovery.

Rajiv Bajaj, MD of Bajaj Auto, too has been sounding a note of caution since a few weeks about demand and sales being disappointing. In an interview on Monday, Rajiv said that the festive period doesn’t make a year’s worth of sales and that the two-wheeler industry is still struggling. He also said that one would have to wait to see how the situation pans out post the festive season.

His comments on sales being disappointing in another interview on CNBC TV18 last week drew flak on Monday after two-wheeler companies announced record sales. However, Rajiv too has pointed out that there is a difference between wholesale and retail sales.

In the case of Bajaj, the company posted its “highest-ever sales” on the back of increased exports. While Bajaj domestica sales went up 11% in October, it saw a significant increase of 29% in exports. It also saw a 65% drop in domestic commercial vehicle (autorickshaws) sales in October.

Vinkesh too says that at retail stores, dealers have been seeing good footfall and enquiries, but the conversion isn’t happening. “People come in to see vehicles, discuss and ask about financing. But it seems like they’re really thinking whether they should buy a vehicle and get into a financial obligation of paying EMIs amid a slowdown. This is despite the purchase trend shifting from that of desire to need,” he adds.

Vinkesh also says that while they’re happy to see the festive season provide a trigger for some sales, on the ground this is just a blip and they don’t expect the growth trajectory to sustain beyond the festive season.

“Unless things are back on track for the economy and we have a vaccine so that everyone is confident about going out, or if we see external factors such as some form of government support or stimulus, I don’t see the situation improving in the near future. I can’t predict for sure, but I think it’ll be another 6 months to a year before we can say things are normal and customers are buying,” Vinkesh adds.

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