Moneycontrol PRO
Upcoming Webinar:Watch a panel of experts discuss: Challenges of continuously evolving regulation for Cryptocurrency, on 7th July at 3pm. Register Now

This week in Auto: First green shoots appear in the two-wheeler industry

Here are all the important headlines of the week from the auto space

June 13, 2020 / 03:57 PM IST

Nine out of every ten showrooms of two-wheeler manufacturers are now operational across the country. Customer enquiries and even bookings have reached to pre-covid levels for some players. Pent up demand and the need for private mobility may be the reason behind the spurt.

More on this later in the copy but first here are all the important headlines of the week from the auto space.

Motherson Sumi aims for $35bn turnover in 5 years

Motherson Sumi System’s desire to grow business is hitting highs, COVID-19 notwithstanding. The auto parts manufacturer wants to triple revenues to $35 billion over the next five years and develop new business segments like aerospace, defence, information technology and healthcare.

The previous five year plan which started in FY16 was to achieve a three-fold increase in consolidated revenues to $18 billion but it closed well short at $12 billion.

Close

Retail car volumes drop 87% in May

Automobile dealers' body FADA on Thursday said passenger vehicle (PV) retail sales in May declined 86.97 percent to 30,749 units as compared to same month last year, hit by coronavirus-led lockdown.

According to Federation of Automobile Dealers Associations (FADA), which collected vehicle registration data from 1,225 out of the 1,435 regional transport offices (RTOs), PV sales stood at 2,35,933 units in May 2019

Hero MotoCorp cuts capex to Rs 600 crore

Hero MotoCorp, India's largest two-wheeler maker, has slashed its capital expenditure (capex) programme by 40 percent to Rs 600 crore for FY21, in line with the rest of the auto industry.

The manufacturer of Splendor and Maestro, however, clarified that there has been no cutback on investments on new product development and R&D.

Mahindra ready to cede control of SsangYong

Nearly a decade after acquiring majority stake, Mahindra & Mahindra (M&M) is ready to cede control of its beleaguered Korean SUV-manufacturing company SsangYong Motor Company (SYMC) after having failed to turnaround the subsidiary.

SYMC is one of the several loss-making subsidiaries, which will be under the M&M board’s scanner, that will warrant some strategic decisions in the near future, senior executives talking to the media post the March quarter announcement said.

Honda to replace fuel pump in 65651 cars

Honda Cars India (HCIL) on June 11 said it would voluntarily replace fuel pump in 65,651 units of its select car models manufactured in 2018.

The fuel pumps installed in these vehicles may contain defective impellers, which could, over time result in engine stopping or not starting.

Demand for bikes, scooter back to Pre-Covid levels

Bike and scooter manufacturers are witnessing a surge in demand with the lifting of the lockdown powered by the need to procure privately mobility. Booking numbers shared by dealers are similar to pre-covid days for some of the companies.

Eicher Motors-controlled Royal Enfield for instance used to clock 60,000 units a month in sales before the lockdown. The company now states that after the reopening bookings have almost scaled back those levels.

Speaking to mediapersons after announcement of March quarter financials Vinod Kumar Dasari, CEO of Royal Enfield & Whole Time Director Eicher Motors said, “Around 85-90 percent of the dealerships are now open and our bookings are now near pre-COVID levels”.

With 100 percent of vendor partners now operational Eicher is pushing for upping production at Royal Enfield. While customers have returned to Royal Enfield its premium pricing notwithstanding they have also started to crowd the showrooms of Hero which is the market leader in budget bikes.

Naveen Chauhan, Head of National Sales, Hero MotoCorp said, “There is an uptick. Customer is coming and asking for our products. Overall, we see this as a very positive cue. And in terms of inquiries, we are right up there. Week-on-week these numbers are improving and this is a positive trend we see”.

Pent-up demand, need for individual mobility due to social distancing norms, strong rural demand, government-backed initiatives, easy finance schemes, discounts and a good monsoon is expected to augur well for the two-wheeler industry.

For the industry 80-90 percent of their total dealership strength have already started functioning. Except for markets in Gujarat and Maharashtra, which have been worst hit by the pandemic showrooms in the rest of India have reopened.

N. Radhakrishnan, President, CEO & Additional Whole-Time Director, TVS Motor Company said, “Markets are opening up. We expect to gain momentum given the social distancing norms. Higher penetration of retail financing is likely to help. The series of relief measures taken by union government will also help the liquidity, and it will have definitely an effect in the medium and long term.”

Manufacturers are now concerned about ramping up production since factories are still operating at less than half of their actual capacity. This is due to limitations to manpower strength due norms defined by the local administrations and lower supplies of parts from vendors.

Reverse migration of labour created manpower shortages across industries including the automobile sector. The auto component supplying companies were the worst hit. However with factories now reopening steadily and gradually looking for a ramp up in production this issue is negated.

Niranjan Kumar Gupta, CFO, Hero MotoCorp said, “Over the last 2-3 years, we have been chasing retail. And now if retails are chasing production, I think it's a good problem to have, especially coming on the back of low inventory that we opened up the year with. We see manpower for our plant is coming back, of course not to the full level now. But given that our general pay scale, also for contractors, casuals or workers, is quite remunerative compared to their alternative options. We do expect a lot of them to come back, which they have started already.”
Swaraj Baggonkar
first published: Jun 13, 2020 03:54 pm
Sections
ISO 27001 - BSI Assurance Mark