Business

Auto sector sees slow start to festive offtake

Fewer takers: The passenger vehicle demand trend remains weak across major markets. B. VELANKANNI RAJ

Fewer takers: The passenger vehicle demand trend remains weak across major markets. B. VELANKANNI RAJ   | Photo Credit: B. VELANKANNI RAJ

‘Enquiries-to-sales conversion weak’

The weeks prior to the onset of the festival season seem to have remained subdued for the automobile sector, with analysts seeing a slow start to festive offtake.

“Our recent interaction with leading two-wheeler (2W), passenger vehicles (PV) and commercial vehicles (CV) channel partners in key markets of Delhi, Maharashtra, Kerala and Rajasthan indicated no signs of demand recovery as enquiries-to-sales conversion continues to remain weak year on year,” said Deep Shah, research analyst, and Poorvi Banka, research associate, Institutional Equities, Prabhudas Lilladher Pvt. Ltd.

“However, with the onset of key September festivals like Ganesh Chaturthi in Maharashtra and Onam in Kerala, there has been an increase of 5-8% in retail sales (especially in PV and 2W segments), while CV sales continue to remain weak,” they said.

In the PV segment, the euphoria around new product launches is driving enquiries. Though the PV demand trend remained weak across major markets, with enquiries-to-sales conversion even weaker for existing models, recent launches such as Hyundai Venue, Kia Seltos, MG Hector and Suzuki XL6 have helped bring footfalls to showrooms.

“The average inventory levels for most PV players remained at 25-30 days (stable month-on-month) except for Tata Motors, where it is still higher at 35-40 days,” Prabhudas Lilladher analysts said.

“PV sales in key festive States like Kerala is witnessing 5-8% MoM recovery in bookings, led by onset of Onam festival. Our interaction with channel partners indicates there was no significant impact of floods in Kerala except in a few regions of northern Kerala,” they said.

In the two-wheeler segment, inventory still remained high despite continuous correction. “While demand continues to remain weak in major markets, we note 5-8% volume recovery in rural pockets of Maharashtra. However, in tier 2 cities like Pune there is still no sign of demand recovery even for the Ganesh festival yet, as volumes are down 10-15% YoY (festive to festive) so-far,” the analysts said, adding the CV segment remained impacted on account of weak freight availability.

The slump has also impacted the luxury vehicle and super bike segments. “The ongoing economic slowdown in India and slump in the automobile market has also impacted the super bikes segment as people are deferring purchase decisions. We hope things will change with improved liquidity during the festive season,” Ajinkya Firodia, managing director, Motoroyale Kinetic, said on the sidelines of the launch of MV Agusta Turismo Veloce 800 in Mumbai.

The automotive components sector will also continue to suffer and the sector’s revenue growth is expected to be halved in next two fiscals, according to Crisil.

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Printable version | Apr 3, 2020 11:31:52 AM | https://www.thehindu.com/business/auto-sector-sees-slow-start-to-festive-offtake/article29310329.ece

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