Most Auto Firms Saw Demand Rebound In July, Say Brokerages

Sales numbers continued to recover for most Indian automakers in July as lockdown restrictions were eased, according to brokerages.

Factory-gate shipments of passenger cars, and two-wheelers rose in the range of 6-18% month-on-month in July, according to data compiled from the reports of Nirmal Bang, Emkay Global, Jefferies and Motilal Oswal. But Escorts Ltd. and Mahindra & Mahindra Ltd. saw sales plunge 32% and 35%, respectively, due to a seasonally slow month.

The revival in the demand for most segments comes as a relief after sales tumbled in May when states imposed curbs to contain a deadly second wave of Covid-19. That stalled the nascent recovery after the disruption caused by the national lockdown a year earlier.

“Our channel checks indicate that positive momentum witnessed in June should continue in July, aided by the easing of lockdowns and pent-up demand across regions,” Emkay Global said in a research note. They expect a sequential improvement in volumes across segments, barring tractors.

Passenger vehicles rebounded faster on increased preference for personal mobility.

“Inquiry levels are healthy and up by 10% over Jul 2019, while bookings are flat,” Motilal Oswal, said in a note. “Salary increases for government employees have also created demand, leading to higher retail.”

While two-wheeler industry is also seeing uptick in sales, recovery has remained slow. This is because of rising fuel prices, impact of the second wave and the fear of a third wave, Motilal Oswal said. Inventory stands at 45-60 days, it said.

Inquiry levels in the domestic two-wheeler markets are gradually improving with the entry segment witnessing better trends on the back of improved rural sentiments, according to a report by Nirmal Bang Institutional Equities. They, however, expect the original equipment makers with a higher export market exposure to perform relatively better, he said.

Tractor recovery has slowed due to a seasonally slow month as buying happens around June. Commercial recovery has also been slower, analysts at Motilal Oswal said, adding inventory levels for both stand at 30 days.

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