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Informist, Monday, Dec. 2, 2024

 

By Anand JC

 

MUMBAI – Growth momentum of automobile companies during the festival season has lost steam over the last two financial years, a quick analysis of data by Informist shows. Following the weak first six months of 2024-25 (Apr-Mar), carmakers were hoping for a turnaround in fortunes during the festival season, but growth during this season has remained weak.

 

Based on exchange disclosures, combined volumes despatched by automobile companies in October and November of FY25 have risen 7% on year to 4.1 million units. While this is higher than the 3.8 million units sold in the same two months of FY24, the growth rate has fallen sharply from 25% clocked in that period. In Oct-Nov FY23, despatches were flat on year, but in FY22, these contracted 20.4%.

 

Automobile sales growth has failed to match the growth seen last year despite only two days of the inauspicious 'Shraddh' period in October this year. In FY25, this period began on Sept. 18 and ended on Oct. 2, while in FY24 it had begun on Sept. 29 and had ended on Oct. 14. This means the sales growth of FY24 was despite two weeks of the inauspicious period falling in October. The low growth in these two months in FY25 needs to be seen in this context as well – lower growth despite two additional weeks of regular sales.

 

This year, India celebrated Diwali between Oct. 28 and Nov. 3 and Dussehra on Oct. 12. In the previous year, Diwali fell between Nov. 10 and Nov. 14 and Dussehra was on Oct. 24.

 

FESTIVE SEASON

The average on-year growth in October and November combined registered by nine major listed automobile companies fell to 6.2% in FY25, lower than the 13.3% seen in FY24 and 18.1% seen in FY23. Automobile sales in Oct-Nov FY22 had contracted 2.6% due to the COVID-19 lockdown; these had increased 16% in the same period in FY21.

 

Carmakers have lamented the weak demand for passenger vehicles this year, but had hoped the festival season would boost despatches. The combined passenger vehicle despatches of Maruti Suzuki India Ltd., Mahindra & Mahindra Ltd., Tata Motors Ltd., and Hyundai Motor India Ltd. in October and November this year was 790,566 units, 6% higher on year. In October and November of FY24, passenger vehicle despatches by these top four manufacturers had grown 38% on year.

 

"This is the year of consolidation for passenger vehicles; they posted a growth rate of 4-5% on year in Apr-Sept. The inventories are not alarming any more, discounts offered by the automobile companies on them will be lower by December-end as compared to the festive period," said the lead research analyst at a major domestic brokerage firm. Discounts offered during the festival season did help, as inventory levels for passenger cars as at November-end corrected to 42–49 days from 75-80 days in October.

 

After a couple of years of slowdown, two-wheelers have regained growth momentum in recent quarters, but have not been able to shake-off the weak demand. "Passenger vehicles and 2-wheelers were affected by the slowdown in urban areas, especially higher-priced variants which are usually preferred more in urban areas. Scooter sales were also affected due to the urban slowdown," said Mitul Shah, automobile analyst at DAM Capital.

 

The total two-wheelers sold by Bajaj Auto Ltd., Eicher Motors Ltd. (Royal Enfield), Hero MotoCorp Ltd., and TVS Motor Co. Ltd. in October and November of FY25 increased to 3.1 million units, up 8% on year. In the same months in FY24, two-wheeler despatches had risen 24% on year. "Two-wheelers is the most promising segment right now. The post festive demand in this segment is very good," the analyst at the major brokerage said.

 

CAPEX LULL

Commercial vehicles have endured a difficult year so far, and could not reverse the trend during the festival season. Commercial vehicles sold by Ashok Leyland Ltd., Eicher Motors, and Tata Motors combined in October and November in FY25 were 104,028 units, 2% lower on year. In the festival months of October and November, despatches of commercial vehicles had increased 4% in FY24, 5.1% in FY23, and 14.5% in FY22.

 

Only three companies managed to register double-digit growth in October and November of FY25 combined -- Royal Enfield saw 17.1% on-year growth, M&M automobile sales grew 16.2%, M&M farm equipment sales rose 19.7%, and TVS Motor sales grew 11.4%.

 

Commercial vehicle sales have gained in recent years from the central government's capital expenditure boost. However, the capital expenditure this year has not been as planned, having got off to a slow start due to the general elections. This could have also had a spillover impact on sales of passenger vehicles and two-wheelers. Further, sales of commercial vehicles are also more directly linked to the country's growth. India's September quarter GDP growth of 5.4% was sharply lower than the consensus estimate of 6.5% and the Reserve Bank of India's projection of 7.0%. Perhaps the auto sales numbers of October and November are a precursor of things to come?  End

 

Edited by Ashish Shirke

 

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