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Last Updated : Jul 02, 2020 04:07 PM IST | Source: Moneycontrol.com

June auto sales: Two-wheelers and tractors on the fast track, CVs falter

We believe that demand for CVs would gather steam slowly as their fortunes are directly linked to the economy

 
 
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Highlights
- Demand traction in two-wheelers and tractors
- Passenger cars put up a good show too
- Commercial vehicle manufacturers are still struggling
- It will be an uphill road for automakers due to multiple challenges

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Automakers faced a lot of heat after the COVID-19 outbreak as production came to a grinding halt and dealerships hit a dead end. However, thanks to lockdown relaxations in May, the companies have started reopening their manufacturing facilities and dealerships slowly.

As the previous note suggested, two-wheeler and tractor segments outperformed others in June in terms of monthly volumes. Passenger cars also did relatively well. What continues to be under extreme stress is the commercial vehicle (CV) segment.

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Hero MotoCorp’s June volume registered a year-on-year (YoY) decline of 27 percent, but is up 4 times compared to May 2020. The same is the case with Bajaj Auto and TVS Motors, which registered volume decline of 26.4 percent and 34.8 percent YoY, respectively, but posted a growth of 273.4 percent and 252.6 percent on a month-on-month (MoM) basis. Eicher Motors’ volume growth (99.2 percent MoM) is less compared to its peers as it caters to the premium segment, which is picking up slowly. Overall, the numbers from two-wheeler companies indicate a V-shape recovery for the affordable category.

Though Maruti’s monthly volume halved in June compared to the same month last year, it is up 4 times as against May.

The tractor segment continues to be on a roll. Escorts posted a YoY growth of 22.8 percent and M&M 10.4 percent. The absolute numbers stood at 10,623 units and 36,544 units, respectively, for June 2020.

At the other end of the spectrum, commercial vehicle manufacturers are a worried lot. Ashok Leyland and VECV reported a decline of more than 70 percent YoY in June 2020 while M&M took a hit of 36 percent.

Outlook

The road ahead will be patchy for the auto companies as they need to maintain social distancing in factories and dealership outlets as well.

We believe that demand for CVs will gather steam slowly as their fortunes are directly linked to the economy.

The timely arrival of the South West monsoon, coupled with benefits of a record Rabi crop, the government support for farm initiatives and considerable progress in the sowing of Kharif crop have all resulted in positive sentiment among farmers. These underlying factors, along with better cash flows, will keep the tractor and two-wheeler demand buoyant in coming months.

Passenger vehicles are also expected to do well, given the preference for personal transport as people may continue to steer clear of public transport. Here too, affordability matters, as the threat of job losses looms large across sectors.

For more research articles, visit our Moneycontrol Research page.
First Published on Jul 2, 2020 03:47 pm
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