India: Automotive retail sales up by 11.7% m-o-m in Sep'20

Overall retail sales up by 11.66% in September 2020, The automotive industry sold 13,44,866 units across segments (2Ws, 3Ws, CVs, PVs and tractors) in September, which was down 10.24% y-o-y, but a healthy 11.66% growth over Aug'20 sales.

Upward trend continues

With the government's persistent effort to unlock India, the month of September witnessed automobile registrations on a rise as compared to previous months. Passenger vehicles, for the first time, saw positive growth coming back on YoY basis. With social distancing on the customer's mind, coupled with the government's push to further normalize business conditions and banks becoming more considerate to finance vehicles, entry-level passenger vehicles saw good demand. Thus, indicating a preference for personal transportation over public. New launches and vehicle availability played their part as catalyst.

Currently, the economic revival is mostly limited to rural India and impact of COVID-19 is still felt on larger states and urban centers, the top states that make up half of India's economic output (Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka, Gujarat and West Bengal) have now started showing signs of revival as economic activities in these states are at their peak since lockdown began in March, thereby creating a demand for automobile sales.

Festive season to further enable high growth

• The months of October and November brings with themselves the much-awaited festivals of Navratri, Durga Puja and Diwali. With no more lockdown announced by the Central government, a high growth period is anticipated during these two months for automobile sales in the country.
  
  

• In addition, the government's consideration to waive off interest on interest during the moratorium period for loans up to INR 2 crore will further help in improving customer sentiment, thus making the auto companies conclude vehicle purchase decisions during the festivities.
  
  

• With banks and NBFCs also gearing up with various festival offers to woo retail customers, auto sales are expected to witness a renewed growth and may close at par with last year. Passenger vehicles and two-wheelers are anticipated to lead the way.
  
  

• On the other hand, with festival season around the corner and elections approaching in Bihar, the risk of COVID-19 spread resurging may play a spoilsport in specific regions.
  
  

Outlook

Manufacturers and dealers should be extremely cautious against building any further inventory, as it may lead to a disastrous situation similar to the last two festive seasons when sales were below the mark.

However, the inventory for two-wheeler stands at 45-50 days and passenger vehicle at 35-40 days. Any dampener in vehicle sales during the upcoming festivals might have a catastrophic impact on dealers' financial health. Also, the increasing cases of COVID-19 in the country could hamper auto sales.