Automobile sector on its path to Recovery
Posted by : Siddhant | Fri Jun 03 2022
India’s automobile industry has begun to see a rebound, with monthly and annual sales numbers showing strong increase. Even those who had previously struggled have begun to show signs of improvement. Market leaders like Maruti Suzuki, Hyundai, Tata Motors, and Bajaj Autos have released their monthly sales results for May, indicating an increase in sales figures when compared to YoY as well as MoM data.
According to estimates from 2021, India’s automobile sector is the world’s fourth largest, with a current market value of more than US$ 100 billion, accounting for 8% of the country’s total exports and 2.3 % of GDP. Players in the Indian auto industry include many home-grown brands as well some of the leading international players vying for a share of their pie in this vast market.
This industry directly and indirectly employs millions of people. Hence, its performance becomes critical to the economy and industry trends are closely monitored. Nearly all the industry’s major automakers witnessed a three-digit increase in sales in May compared to the previous year. The graph below demonstrates how sales of Four Wheelers have changed over time.
All car manufacturers see a massive YoY growth in sales in May 2022 on a low base of May 2021
Maruti Suzuki, the biggest automobile manufacturer in India, has recorded a 278.3 % YoY gain in sales, rising from 32,903 in May 2021 to 124,474 in May 2022. It increased by 2.03 % month over month, from 121,995 in April 2022 to 124,474 in May 2022. The situation is similar for the remainder of the major market participants; almost all of them have had a double-digit YoY increase and less growth on a month-to-month basis, as seen in the graph. The growth is attributed to the low base effect. Last year’s sales numbers were extremely low when compared to this year’s as they were severely hampered by the second wave of Covid 19, which compelled people to remain cooped up in their houses, reducing demand for automobiles.
Toyota’s sales witness maximum YoY growth, followed by Skoda in May 2022
Comparing monthly growth would give a more realistic picture. Comparing April sales data to May sales data, most companies have had either a little positive or negative increase, with the exception of Mahindra and MG, which have experienced significant positive growth.
MG Motors reported a twofold rise in retail sales in May 2022, hitting 4008 units. MG further stated that demand for its vehicles is good, and with healthy bookings, the company expects growth to continue despite the global epidemic affecting manufacturing. On the other side, Mahindra is enthusiastic about the recently unveiled Scorpio-N. They have received unprecedented bookings and have a healthy pipeline, thanks to the debut of the Scorpio-N, which is generating a lot of buzz and promises to be another hit from Mahindra. Another of their recent launches, the XUV 700 also received more than 70,000 booking and have a wait list of a year. Part of this is due to the continuing semiconductor shortage, causing a delay in deliveries.
Tata Motors surpassed Hyundai in sales number for second time in last six months
In May 2022, Tata Motors set several new records, the most notable of which was achieving second place by outselling Hyundai by 1047 four-wheelers. What’s more remarkable is that it sold 3454 electric vehicles in India last month, representing a staggering 626 % YoY increase. Tata Motors now has the second-largest market share in the four-wheeler industry, trailing only Maruti. This month saw the highest ever monthly sales of passenger vehicles for Tata Motors.
Maruti Suzuki retains its leadership position and Tata Motors beats Hyundai to the second place in May 2022
Coming to the two-wheeler segment, it has also seen healthy growth, with Hero MotoCorp leading the way in terms of sales and Honda leading the way in terms of YoY growth, while TVS leads the way in terms of MoM growth %.
Outperformance by Hero Motors & TVS, with sales grow on YoY basis as well as MoM basis in May 2022
Not only have the enterprises done well in domestic sales, but they have also seen tremendous development in exports. Moreover, the worldwide demand has started to build up and is likely to reach pre-covid levels, companies in the automobile sector will have a fantastic opportunity to develop.
Hero regains its leadership in two wheelers with highest sales among peers in May 2022
Conclusion
It is reasonable to assume that the automobile sector is rebounding and will continue to do so in the future. If the growth continues at this rate, it will be soon reach the pre-covid levels. To make up for missed growth due to the epidemic, automobile businesses need to expand their offerings based on latest market trends. Many have begun offerings EV products, which are expected to grow faster than conventional vehicles.
For more than a year now, the industry has been severely plagued by a scarcity of semi-conductor chips, which forced manufacturers to reduce manufacturing. Even though the current expansion in growth is attributable to an improvement in chip supply, its impact on the auto industry lingers, with some cars having waiting times of nearly a year. Unfortunately, this problem is expected to persist in the coming months. Though we can see demand rising across the spectrum of the auto industry, a lot depends on steady supply of semiconductors, to match production in response to the increasing demand.
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Research done by: Ketan Sonalkar, SEBI Rgn No INA000011255
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