Lockdowns, plant closures hit wholesale auto sales

The combined impact of lockdowns across states due to the rise in Covid-19 cases and many OEM's shutting down their plants temporarily has negatively impacted wholesale dispatches.

Wholesale dispatches from automakers’ factory gates in May declined sharply across categories, as many states were in lockdown for most part of the month. While the restrictions impacted overall sales, original equipment manufacturers also halted operations at manufacturing plants for annual maintenance and due to workers’ agitations over Covid-19 safety concerns.

Passenger vehicle dispatches declined 61.2% in May 2021 as compared to May 2019, two-wheelers fell by 79.6% and three-wheelers by 97.6%, according to monthly data released by the Society of Indian Automobile Manufacturers (Siam) on Friday.

Since both May 2021 and May 2020 were abnormal months for the auto industry due to the pandemic, a comparison with May 2019, a normal year, presents a more realistic picture.

The total production of passenger vehicles, two-wheelers and three-wheelers in May 2021 was at 8,06,755 units as against 24,17, 597 units in May 2019 — a de-growth of 66.63%.

Retail sales numbers for May announced by the Federation of Automobile Dealers Associations (Fada) on Thursday also showed a similar trend, with overall sales declining by 71%.

Industry analysts had predicted a double-digit decline across segments. In May, a large part of the country was in lockdown and inquiries were significantly lower than normal. Wholesales were expected to decline month-on-month due to the impact of localised lockdowns and supply-side issues, including availability of industrial oxygen, analysts had said.

Nomura said in a research note that wholesale dispatches across segments remained sharply lower as Covid-related lockdowns impacted demand. Given the disruptions, Nomura said it would avoid drawing any conclusions from the May volumes. However, the pace of recovery will be important to track June/ July onwards.

Naveen Soni, senior VP, Toyota Kirloskar Motor, said, “Last month witnessed no production at our plants in Bidadi as well as minimal sales owing to the much-needed restrictions and sporadic lockdowns in different parts of the country. Hence, comparing last month’s performance to that of May 2020 would be highly skewed, as May 2020 had witnessed a gradual restart of both operations and sales. More so for TKM, as even before the restrictions were announced in Karnataka, we were well within our planned annual maintenance shutdown, thereby adding onto the number of non-production days.”

Jefferies said the spread of Covid-19 and the lockdowns took a big toll on Indian auto volumes in May, and said web activity indicates that interest in PVs has bottomed above the 2020 lows and was inflecting again. This, along with the sharp fall in new Covid-19 cases, suggests a demand recovery is around the corner.

Rakesh Sidana, director, sales, MG Motor India, said, “In these times, our efforts continue to be directed towards keeping people safe and maximising service to the community. The continued lockdown in some states in June indicates that part shortage will continue to hamper overall production next month. Based on the booking trend, we are hopeful of an uptrend in June.”

Motilal Oswal said a majority of OEMs had advanced their maintenance shutdowns during Apr-May 2021 to merge it with the lockdown. It said that its interactions with leading industry channel partners reflect optimism regarding a recovery once the lockdown was lifted.

Yadvinder Singh Guleria, director, sales & marketing, Honda Motorcycle & Scooter India, said, “May ’21 witnessed further slowdown in sales momentum with close to 80% of the network being non-operational due to local lockdowns. The situation on ground is very dynamic with weekly announcement of lockdown extensions. We are closely monitoring the situation and with some relaxations in economic activities visible across towns as per new guidelines, we are optimistic on gradual resumption in our dealership operations caring safety and convenience of the customers.”

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