HomeBUSINESSCar production jumps 26% in Aug even as retail sales lag

Car production jumps 26% in Aug even as retail sales lag


NEW DELHI : Domestic dispatches of passenger vehicles in August rose 26% from a year ago to over 390,000 units, as automakers ramped up production to stock dealerships ahead of festive season.

The festival season kicked off at the end of August with the 10-day Onam festival in Kerala and the Ganesh Chaturthi widely celebrated in Western India, followed by Diwali in the North and Central regions in October and November. This season accounts for nearly a quarter of the Indian automobile industry’s annual sales.

Automakers, therefore, typically build up stocks to capture this demand in the run-up to the festivities. According to industry executives, passenger vehicle inventory in the system is now at an average of 22-26 days, and may rise further as production ramp-ups continue.

August shipments at the country’s largest carmaker Maruti Suzuki grew 30.5% to 143,692 units, 5.6% to 49,510 units for Hyundai Motor India, and 68.3% to 47,166 units for Tata Motors passenger vehicles. Mahindra & Mahindra’s utility vehicles output grew 87% to 29,516 units. For several automakers like Mahindra, Skoda Auto India and Tata Motors, wholesale dispatches of passenger vehicles in August were at or near record high levels.

However, even as dealership inventory improves, retail sales are lagging. Production of vehicles is likely to see significant improvement in the second half of the current fiscal year as supply snags ease, which could make it a year of record production for many automakers. There is a total of 700,000 pending orders for passenger vehicles in the industry at present.

“Vehicle stock in the industry is estimated to be at 220,000 units, which is up from 120,000 units in the beginning of the year – that’s a net addition of nearly 100,000 vehicles in just three months of June, July and August. It is the highest ever sales number in a block of three months in the industry,” Shashank Srivastava, executive director, Maruti Suzuki said, while pointing out that retail sales of passenger vehicles at 1.48 million in the April-August period is 100,000 units short of 1.58 million in total wholesales for the same duration. Inventories, however, remain under control and below the pre-covid normal industry average of 30 days, he added.

Srivastava said that Maruti Suzuki saw a 10-15% jump in bookings during the Onam period, and expects that festive season sales this year will grow by a similar quantum too, contingent on supplies keeping pace.

Shailesh Chandra, managing director, Tata Motors Passenger Vehicles said that the inventory position is not a matter for concern as the demand outlook remains strong, and the build-up in stock levels comes in the backdrop of severely sub-optimal stock levels in the channel in the beginning of the year.

Chandra said that Tata Motors expects festive season sales to be at par with the trend seen last year, or higher if supplies are ramped up adequately to meet demand for specific models.

Last year, an acute shortage of semiconductor chips hit the automotive industry in India just as it was entering the festive season in September. An improved inventory position and better supply chain visibility is likely to ensure there is growth in dispatches over last year, but retail sales could reflect a different trend as the festive season in North India was split between the two months of October and November, whereas this year, the season concluded with the Bhai Dooj festival in October itself.

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