Automotive manufacturers have been saying that the pandemic will lead to a significant shift in consumer habits — some temporarily, but some of which is here to stay. While some public transportation still remains shut, the demand for two-wheelers and passenger vehicles has seen some demand return in July, but automakers aren’t holding their breath.
Tata Motors Chairman N Chandrasekaran said on Monday that there is a tremendous deal of transformation to be expected in the mobility segment over the next two years. “The move to 'slow' travel and personal (versus public and/or shared) transport may shape future demand for passenger vehicles,” he said.
Maruti Suzuki said that it sold 88.2% more in July than June 2020. Their July sales were nearly at July 2019 levels, up by 1.3%. Similarly, Hyundai Motor India was also near July 2019 levels in 2020, with sales last month 2% down year-on-year. Overall, its sales were down 28%. Mahindra and Mahindra reported a 35% decline in domestic sales last month and total sales were down 36% YoY. Toyota Kirloskar Motors reported a 48.32% decline in domestic vehicle sales in July year-on-year.
Similarly, motorcycles have also seen some recovery. Sales of Bajaj Auto’s motorcycles declined 26%, as compared to July last year. The country’s largest two-wheeler maker Hero MotoCorp on Saturday reported a 3.97% dip in sales in July compared to the same month of last year. TVS Motor also reported a 10% decline.
However, it is important to note that in July 2019, the auto sector had then seen the worst slump in two decades.
July 2020’s numbers are definitely better than they were in May and June, but it may not necessarily be a signal that demand has returned.
Shashank Srivastava, executive director, marketing and sales of Maruti told Business Standard that this was more of a supply-side recovery than demand side where companies have been able to ramp up production as chinks in the supply chain have reduced, but its impact on retail sales remains to be seen.
Public transportation in most cities, especially metro rail hasn’t been restarted. Additionally, shared mobility was a small but growing part of the pre-COVID world, according to a Facebook-BCG report, with 95% of the shared mobility market belonging to cab hailing firms such as Ola and Uber. The report also says that 4-wheeler sales had seen a sustained volume decline since July 2018, due to multiple factors influencing the slowdown, and it was a time discretionary spending was already being cut down.
In a post-COVID world, the trend is expected to move from shared mobility to personal vehicles, as people look to physically distance themselves.
However, now there is a two-way crunch - people are scared for their health, but also want to cut down on discretionary spending. At a time like this, lower-end cars have seen an uptick in demand, as have used cars.
This is evidenced by Maruti Suzuki, India’s largest carmaker, who saw an uptick in first-time buyers and additional car buying, which Maruti Suzuki’s Executive Director (Sales and Marketing) Shashank Srivastava attributed to preference for personal mobility.
“That means people are preferring personal transport over public transport. At the same time their income levels are also probably going to be suppressed for sometime. Therefore, the trend is towards what we call 'telescoping of demand downwards', that is logical and intuitive. It is also reflecting in the data which we have so far,” he told PTI.
Srivastava told IANS that consumers are shifting the choice downwards due to income loss and uncertainty in jobs and business loss. This, he said, was reflected in car bookings, with 65% of bookings towards smaller cars, as opposed to 55% earlier.
Honda Cars India Senior Vice President and Director, Marketing and Sales, Rajesh Goel also echoed a similar sentiment, and said, “Apart from new car sales in different segments, we feel that customers would also consider certified used car sales as they can afford a well maintained nice looking car with much more affordability.”
The Facebook-BCG report, published in July, also showed that 56% of the people surveyed were planning to reduce spending in the next six months, but of this, 33% said that they would trade down and buy a smaller car or a used car, and 23% choosing to cancel that expenditure.
However, the report states that discounts will be of help. 27% of survey respondents planning to cancel or postpone purchase said that they would be willing to reconsider with a seasonal discount.
In May, a CARS24 report said that about 22.5% of consumers who were planning to buy a new car last year would now prefer to buy a pre-owned car because of their limited budgets.
However, according to the report, unlike metros where consumers intending to buy cars increased by 41%, respondents from non-metro cities feel that they would like to switch to two wheelers instead. The analysis further revealed that 55% of the consumers who were using cabs as their primary mode to commute before COVID would now like to shift to private cars while 15% said that they will switch to two-wheelers.
With inputs from PTI