Auto sales recovery continued in August driven by festive push

Source: The Economic Times, Sept 09, 2020

The retail of automobiles continued to recover in August and the deficit with last year’s sales levels came down significantly as demand improved during festivals like Ganesh Chaturthi and Onam, showed vehicle registration data.

Vehicle registrations in the country increased by 4% in August over July. While the registrations were 27% less when compared to August 2019, it was an improvement over July, when sales were down 36%.

“With the start of the festival season and the government’s continued effort to open up India, the month of August saw good numbers when compared to previous months,” said Vinkesh Gulati, president of the Federation of Automobile Dealers’ Associations (FADA), a lobby of vehicle retailers.

“Apart from the rural market which was showing revival signs until now, urban centres for the first time showed initial signs of demand pullback,” he said.

The sharpest recovery was for the passenger vehicles segment with sales of about 178,500 units – just 7% fewer than August 2019. Two-wheeler sales were down 29% compared to the previous year, while three-wheeler and commercial vehicle sales declined 70% and 58%, respectively.

Tractors sales continued to be higher than the previous year for the third straight month due to good monsoon rains and better rural sentiment. The data were compiled by FADA from road transport and highways ministry’s VAHAN platform. The website captures vehicle registrations from 1,242 out of 1,450 regional transport offices in the country as some states are yet to migrate on to the platform.

The recovery may break momentum in September, cautioned Gulati, due to the Shraadh period this month which is considered inauspicious by some communities. During this period retailers would be focussing on following up on customer leads and generating an order book for October and November in anticipation of festivals like Navratri and Diwali.

Automobile manufacturers are planning record production for the months of September-November as they anticipate substantial demand recovery during these months, ET reported earlier this month.

Govt asks auto industry to cut imports, raise exports

Source: LiveMint.com, Sept 06, 2020

MUMBAI/NEW DELHI: Senior ministers of the Union government took Prime Minister Narendra Modi’s clarion call of Atmanirbhar Bharat forward and urged automakers to reduce their dependence on imports, increase exports, and make India a global manufacturing hub for automobiles and auto components.

“I request the auto industry to not depend on imports, develop import substitutes, and expand its export business. The government will support you in increasing production and boosting employment potential,” said Nitin Gadkari, the Union minister for road transport and highways, and micro, small and medium enterprises.

Minister of railways, and commerce and industry Piyush Goyal and minister of environment, forest and climate change Prakash Javadekar also urged the auto sector to boost local manufacturing at the annual conventions organized by the Society of Indian Automobile Manufacturers (Siam) and the Automotive Component Manufacturers Association of India (ACMA), held on 4-5 September.

This is also likely to boost the economy by creating enormous job opportunities at a time that the country is struggling to shake off the adverse effect of the lockdown imposed to check the spread of coronavirus.

Gadkari urged the industry to develop import substitutes and increase investment in research and development (R&D) and export volumes and said that the government will set up industrial clusters along the 12-lane, 1,400km Mumbai-Delhi expressway. “The expressway passes through the backward tribal areas of Haryana, Rajasthan, Gujarat, Madhya Pradesh, and Maharashtra. Land acquisition cost in these areas is low. The land rate in Gurugram or any big city is ₹2-2.5 crore per acre. I am willing to give you land in these areas for ₹10-15 lakh per acre. I request the auto industry to develop industrial clusters on the land parcels,” the road transport and highways minister said. Gadkari said his ministry will take the responsibility for connectivity to ports, railway stations and airports.

Citing examples of existing auto hubs, such as Sanand, Manesar, and Hosur, Goyal said India must look at boosting its domestic capabilities and expand its global economic engagement.

“The auto industry should reduce dependence on imports, specifically in areas such as steel, tyres, and electronic parts,” Goyal said.

Goyal said he has requested the industry to come up with a viable model for setting up semiconductor fabrication units, which will help increase production of electronic components.

“India needs to focus immediately on setting up fabrication facilities because that is the root of the entire electronics chain. The government is willing to extend support to set these up,” Goyal said. One or more large automakers may look at setting up such units, and even consider moving existing fabrication units from other countries to India, he said. “I think it should be driven by the private sector and the government setting up a fabrication unit is not a good idea.” Goyal said. The industry must aim to become a global manufacturing hub for sunrise sectors, including electric and autonomous vehicles.

The government is working with other countries to sort out tariff and non-tariff barriers, including a free trade agreement with the European Union for India to become a preferred supplier. “We are also considering a credit guarantee model to help exporters. Under the model they may get insurance of up to 90% of their export value. The scheme should be finalized soon,” Goyal said. Gadkari and Goyal also hinted that the government is considering an increase in duties on import of auto components. Javadekar said that the government was evaluating the possibility of reducing goods and services tax for two- and three-wheelers to revive local demand, while Gadkari said that the much awaited vehicle scrappage policy is in its final stages of approval and will be rolled out within a month.

Auto sales bounce back in August on low base effect, pent-up demand

Source:  business-standard.com, Sept 3, 2020

Signalling sharp recovery, automobile sales for most companies in India rose at a brisk pace in August over the same month last year, shows the data released by a clutch of companies on Tuesday.  

Despatches at India’s top two carmakers — Maruti Suzuki India (MSIL) and Hyundai Motor India (HMIL) — zipped past not only the pre-Covid phase, but also the months preceding the pandemic, indicating long-built pent-up demand. The inventory restocking ahead of the festive season also drove despatches. Car companies in India count despatches to dealers as sales.

MSIL’s domestic sales saw year-on-year (YoY) jump of 20 per cent in August, the car market leader said on Tuesday. During the month, the local arm of the Japanese carmaker despatched 116,704 units over 97,061 units a year ago.

HMIL, the second-largest in the pecking order, too, saw despatches go up significantly.  The maker of Creta and i20 models sold 45,809 units, up 20 per cent YoY, the company said. This is the highest volume reported by the Korean carmaker since January 2019, when it sold 45,803 units in the domestic market.

Even as sales are showing an uptick, carmakers are not celebrating yet.  “We would like to carry on with cautious optimism since uncertainty still surrounds the pandemic,” said Tarun Garg, director–sales, marketing and service at HMIL.

He attributed the good show in August to a relatively low base of last year, when the company sold only 38,205 units. He also credited it to the newly launched models, including the Aura, Tucson, Grand i10 Nios — all of which have been received well.

Subrata Ray, senior group vice-president at ICRA, said the sales are being driven by rural demand as well as inventory restocking at dealerships ahead of the festive season.

“The discount levels have reduced substantially, especially in the sub-Rs 10 lakh price bracket, indicating healthy demand momentum and improved demand/enquiries from first-time buyers. The low-base effect of August 2019 — when volume declined 32 per cent YoY — also optically supports overall YoY growth rate. We expect sequential improvement in volume to continue in September as well,” said Ray.

For MSIL, the increase — the sharpest in almost a year — came on the back of last year’s low base and brisk demand for models in its mini and compact segment. Albeit on a low base, sales in these segments advanced at a fast clip of 94.7 per cent and 13.4 per cent, respectively.  The company has been a beneficiary of the growing preference for personal transportation amid the pandemic.  

Mahindra & Mahindra’s (M&M) passenger vehicle (PV) segment — that includes UVs and passenger cars — was a saving grace and helped offset some decline in the overall auto sales.  It saw despatches grow 1 per cent YoY to 13,651 units.

UV major M&M, too, benefited from the month-on-month recovery in demand and improvement in supply chain-related glitches. Snapping a declining streak, the company saw moderate increase in its PV sales.  It grew by a per cent to 13,651 units over 13,507 units a year ago.   “We have been able to meet the uplift in demand by managing supply-chain challenges and going forward,” said Veejay Nakra, chief executive officer, automotive division, M&M.

Indian automakers’ demand outlook cloudy despite some respite in July: Fitch

Source: LiveMint.com, Aug 22, 2020

MUMBAI: Demand for automobiles in India continues to be uncertain even though the sharp slide in sales during April to June slowed in July which could reflect the release of pent-up demand following gradual easing of restrictions to contain coronavirus pandemic, Fitch Ratings has said.

“The auto demand continues to face several challenges and Fitch forecasts overall industry volume to decline by more than 20 per cent in the financial year to June 2021. This forecast could be revised down if the extent and magnitude of the pandemic are worse than we expect.”

The economic fallout from pandemic exacerbated the weak consumer sentiment that was dampened by the higher cost of ownership under BS6 — a more stringent emission framework adopted from April. This is likely to constrain demand from first-time car buyers as well as upgraders despite their preference for private transportation due to hygiene reasons.

Likely curtailment in private and public investments will weigh on demand for commercial vehicles (CVs), particularly medium and heavy commercial vehicles (MHCV), which are used in more cyclical end-markets.

The pandemic has also reduced the availability of financing as lenders exercise caution, particularly to weaker borrowers that form a significant customer base for CVs.

Monthly sales volume particularly in passenger vehicles (PV) improved markedly in July, benefitting from gradual easing in the government’s stringent lockdown measures that were imposed in last week of March. Nonetheless, PV volume remained lower on a year-on-year basis.

Domestic sales volume of PVs increased by 73 per cent in July from June and that of two wheeled vehicles rose by 26 per cent. However, the volume of PVs was 4 per cent lower and that of two wheeled vehicles was 15 per cent lower, although the declines were much smaller than the 50 per cent and 39 per cent respectively in June.

Within PV, sales of utility vehicles increased by 14 per cent in July following a 31 per cent decline in June, underscoring the shift in consumer preference towards compact utility vehicles, said Fitch.

CV volume continued to fall more sharply in July compared with PVs, with continued weakness in MHCVs. Ashok Leyland, a leading manufacturer of MHCVs in India, reported a 75 per cent decline in domestic MHCV volumes in July following a decline of more than 90 per cent in Q1 FY21 for both Ashok Leyland and the broader industry.

Sales volumes of light commercial vehicles (LCV) fared better with Mahindra & Mahindra reporting sales fell by 16 per cent in July compared with decline of 69 per cent for M&M and 80 per cent for the broader LCV industry in Q1 FY21.

The sharp volume declines reduced revenue and resulted in operating losses for most Indian automakers in Q1 FY21. Nonetheless, cost-saving efforts by companies, including Maruti Suzuki, M&M and Ashok Leyland, helped to reduce operating losses.

Hero Motocorp, one of the leading manufacturers of two wheeled vehicles, reported marginally positive operating profit on back of cost savings and lower operating leverage in its two-wheeler business.

M&M’s domestic auto volumes dropped by 78 per cent in Q1 FY21 but a smaller 22 per cent fall in tractor sales and higher margins helped to limit the deterioration in overall operating margins.

Tata Motors’s PV and CV volumes in India fell by 61 per cent and 90 per cent respectively in Q1 FY21, leading to an operating loss at the standalone level despite cost-cutting initiatives. The loss and working-capital mismatch due to production and sales disruptions caused cash burn in excess of ₹4,000 crore during Q1 FY21 but the company’s efforts to conserve cash by reducing investments and securing ₹4,000 crore of debt helped to marginally improve its liquidity buffer at standalone level compared with March.

Auto component sector contracts 12% to ₹3.49 lakh crore in 2019-20

Source: The Hindu Business Line, Aug 19, 2020

New Delhi: The turnover of the automotive component industry stood at ₹3.49 lakh-crore for the period April 2019 to March 2020, registering a contraction of around 12 per cent over the previous year.

However, the after-market in fiscal year 2019-20 remained stable, despite a downturn in the vehicle industry, at ₹69,381 crore, growing marginally by around three per cent over the previous year, the Automotive Component Manufacturers Association of India (ACMA), said on Wednesday.

The apex body representing India’s auto component manufacturing industry in its findings for the fiscal year 2019-20 also said that the slowdown in the domestic market reflected on imports of components. Component imports contracted by 11 per cent to ₹1.09 lakh-crore in 2019-20 from ₹1.23 lakh-crore in 2018-19.

Asia accounted for 65 per cent of imports followed by Europe and North America at 26 per cent and 8 per cent respectively. Imports from Asia declined by 7 per cent, while those from Europe by 22 per cent and from the US by 17 per cent, it said.

Exports contract

Exports of auto components also witnessed degrowth of three per cent to ₹1.02 lakh crore in 2019-20 from ₹1.06 lakh crore in 2018-19, ACMA said.

“The automotive industry faced a prolonged slowdown in FY 2019-20 with vehicle sales in all segments plummeting significantly. Subdued vehicle demand, investments made for transition from BSIV to BSVI, liquidity crunch, lack of a clarity on policy for electrification of vehicles and slow down in key export markets, among others, had an adverse impact on the performance of the components sector in India as also on its expansion plans,” said Deepak Jain, President, ACMA.

Speaking about the current situation, Jain said the auto component industry has displayed remarkable resilience in wake of the lockdown; the industry faced acute challenges on the working capital, production and dysfunctional logistics fronts.

‘Growth returning’

“However, with the unlocking of the economy, growth seems to be returning to the industry with uptick in vehicle consumption especially in two-wheelers, passenger vehicles and the tractor segments, although sales of commercial vehicles continue to be challenged,” he said. The long-term prospects of the component industry continue to be bright, especially with focus of the government on ‘Atma-nirbharta’ and global competitiveness of the industry, Jain added.

Govt urges auto firms to cut royalties to foreign parents: Report

Source: Business Standard, Aug 18, 2020

New Delhi: Commerce minister Piyush Goyal has asked automakers to find ways to reduce royalty payments to foreign parent companies for use of technology or brand names, two sources told Reuters, in an effort to boost local investment and reduce outflows.

In India’s competitive auto market, top-selling carmakers Maruti Suzuki and Hyundai Motor’s local unit pay millions of dollars in royalties to parent companies in Japan and South Korea for using their technology and brand to build and sell cars. Read the rest of this entry »

Government allows sale of electric vehicles without batteries, leaves manufacturers puzzled

Source: The Economic Times, Aug 12, 2020

MUMBAI: The road transport and highways ministry on Wednesday issued a notification allowing the sale of electric two- and three-wheelers without a pre-fitted battery in a bid to bring down the upfront cost of the cleaner vehicles making them more affordable.

However, electric vehicle (EV) makers were left confused by the government’s announcement as finer details were left out of the announcement.

Batteries account for almost half the cost of an EV, making them vastly more expensive than a combustion engine vehicle of similar performance. If the cost of batteries is delinked from that of the vehicle, electric two- and three-wheelers could cost less than fossil-fuel-powered vehicles, the Ministry of Road Transport & Highways (MoRTH) said.

The batteries can then be sold by the manufacturer or an energy service provider, the ministry said. An energy service provider can then rent charged batteries to EV owners akin to the refuelling of conventional vehicles.

Manufacturers questioned that if EVs were sold without batteries how the subsidies under the Centre’s EV adoption policy would be determined. Under its Faster Adoption and Manufacture of Electric vehicles (FAME) policy, the government incentivises the purchase of EVs by giving direct purchase subsidies linked to the capacity of the battery on the vehicle.

“We have asked for clarifications as to how it will get linked to FAME-2,” said Sohinder Gill, director of Society of Manufacturers of Electric Vehicles, an industry body.

Auto firms brace up for the festive season with slew of new launches

Source: Business Standard, Aug 09, 2020

Mumbai: Close to 12 models of cars and sport utility vehicles (SUVs), including facelifts, are likely to hit the road this festive season, which starts with Ganesh Chaturthi on August 22.

While the festive season has always been important for cars and two-wheelers, this year is more crucial because it comes on the back of pent-up demand and pandemic-led disruption. Companies are hoping to make up for the loss of sales in previous months. But they are cautious. Intermittent, localised lockdown has been disrupting production.

“We are operating at 90-92 per cent of our capacity this month and will ramp up. We expect to reach the pre-Covid levels by September end,” said Ganesh Mani, director (production), Hyundai Motor India.

Hyundai is running three shifts at its plant. The firm, which launched four models, including the new Creta and Aura this year, is likely to bring in the new i20 this season. “Expect all the new models to get a big push,” said Mani.

Naveen Soni, senior vice-president (sales and service), Toyota Kirloskar Motor, said: “Each time there is a new infection, 20-25 people go off work. While we are being scientific about the whole process (of lockdown, etc), production is affected.”

Toyota is planning to launch the Urban Cruiser, a rebadged Brezza, ahead of Diwali. With the Cruiser, it hopes to attract first-time buyers.

The compact SUV segment’s share in the SUV market has grown from 5 per cent in 2015 to 13 per cent now, he said. Venkatram Mamillapalle, managing director and chief executive officer, Renault, points out the challenges on supply chains and sourcing strategy. Suppliers, too, are grappling with manpower movements, material availability, restricted working hours, etc.

Close to 50 models were launched in India in the past 12 months, but companies have not been able to realise their potential due to the pandemic, said Puneet Gupta, associate director at IHS Markit, a sales forecasting and research firm. Of these, at least 10 have the potential to be a volume spinner. Most of the other launches this season will address the SUV segment. Kia Motors, the local arm of Hyundai, unveiled the Sonet, its compact SUV, last week. The model will go on sale in September. Expected to be priced at Rs 7-12 lakh, the Sonet competes with the Tata Nexon, Hyundai Venue, Vitara Brezza, among others. Competition in the sub-compact is set to intensify with the Renault Kiger. Based on the CMF-A+ platform, the Kiger will be the smallest and most affordable SUV from Renault in the country. It’s also expected to go on sale around Diwali. The new Thar from Mahindra, set to be put on the block on August 15; the MG Gloster, a seven-seater model that will compete with the Fortuner; and the new-generation Duster are some other SUVs expected during this festive season.

July sales bring some cheer to automakers

Source: The Hindu Business Line, Aug 02, 2020

New Delhi: After four months of negative sentiments ruling the automobile sector due to Covid-19 disruptions, the July wholesale numbers have given some hopes to manufactures with sales picking up marginally for some players. Enquiries and bookings, too, are up. The upswing is expected to continue throughout the festive season over the next few months.

Whether it is passenger vehicles or the two-wheeler segment, companies have reported either better sales or inched-in nearby, during the month as against the same month last year.

In the passenger vehicle segment, market leader Maruti Suzuki India (MSIL) has reported positive growth (by around 1 per cent) year-on-year (YoY) by dispatching 97,768 units in the domestic market as compared with 96,478 units in July 2019.

However, the country’s second largest passenger car maker Hyundai Motor India (HMIL) reported domestic sales of 38,200 units in July, a decline of two per cent YoY as compared to 39,010 units in corresponding month last year.

But, new entrants like MG Motor and Kia Motorss India continue to sell more vehicles every month.

“With the changing trend of preference for personal mobility, our consistent efforts are towards fulfilling the customer needs and meeting the market demand. With 38,200 units, July ‘20 domestic sales volume is 98 per cent of July ‘19 domestic sales volume,” Tarun Garg, Director (Sales, Marketing and Service), HMIL, said.

Similarly, Veejay Nakra, Chief Executive Officer, Automotive Division, M&M, said there is a growing trend in overall vehicle sales, primarily in rural and semi urban India. In the two-wheeler segment also, the companies have reported higher sales as compared to June. For instance, market leader Hero MotoCorp has reported sales of 5,06,946 units (5,11,374 units). TVS Motor Company reported domestic sales of 1,89,647 units (2,08,489 units).

Electric vehicle market likely to be Rs 50,000 crore opportunity in India by 2025: Report

Source: The Economic Times, Jul 23, 2020

MUMBAI: The electric vehicle (EV) market is likely to be a Rs 50,000-crore opportunity in India by 2025, with two- and three-wheelers expected to drive higher electrification of the vehicles in the medium term in the wake of COVID-19, according to a report.

The report by Avendus Capital, which is an investment banking arm of financial services provider Avendus Group, also said the total cost of ownership (TCO) in case of low- and medium-speed electric two-wheelers is already lower than internal combustion engine vehicles.

“With the present and projected level of EV penetration in the country, EVs in India could represent a Rs 500-billion opportunity by 2025. Two- and three-wheelers will lead the electrification movement in India in the medium term,” it said.

The report also said it expects 9 per cent penetration by 2024-25 in the two-wheeler segment and with the right macroeconomic environment, the number can further go up to 16 per cent and while the segment could grow to Rs 12,000 crore by 2024-25.

E-rickshaw has also emerged as a large market in India in a short time frame even as a large part of this market is still unorganised and based on lead-acid batteries, the report stated.

It added that this market is expected to rapidly shift to lithium-ion battery and by 2024-25, as much as 40 per cent of the e-rickshaw market is expected to be li-ion based.
“Over the past decade, the economics of the technology used in this sector has improved significantly, and today, EVs make economic sense across multiple use cases,” said Koushik Bhattacharyya, director and head (industrials) at Avendus Capital, at the launch of the report.

He added that the inevitability of transition to EVs is accepted by the world, however, the timeline for mass adoption is still a topic for debate. “But, we believe that we are moving quickly towards a mobility regime where EVs become mainstream.”

The current COVID-19 situation is expected to accelerate the rate of adoption of EVs in the medium term as customers look for environment-friendly and cost-effective personal mobility solutions, and also because online commerce is fast becoming the norm, the report said.

“India represents the fourth-largest automobile market in the world and the second-largest two-wheeler market with around 20 million units. It is also a country with massive dependency on oil imports, with a USD 112 billion oil import bill in FY19,” added Bhattacharyya. He added that pollution in many Indian cities has reached alarming levels. “All these factors combined make a strong case for EV adoption in India.”

On the ownership cost of high-speed electric two-wheelers and other use cases such as retail four-wheelers and commercial vehicles, it said the TCO will become favourable as the battery prices drop further.

“E-auto makes economic sense on a TCO basis. We expect to see intensive action in this space going forward. We expect around 20 per cent EV penetration in e-auto category by FY25. We expect this segment to be Rs 40 billion (Rs 4,000 crore) by FY25,” said Ankit Singhal, vice-president (industrials) at Avendus Capital.

In the medium term, we expect the EV adoption in the four-wheeler category to stay limited to commercial or fleet applications. The overall penetration in the electric four-wheeler segment is expected to be about 2 per cent, he said.

With the right macroeconomic environment, it could go up to 5 per cent, he said adding, “We expect this segment to be Rs 100 billion (Rs 10,000 crore) by FY25.”

Avendus Capital said it expects factors mainly policy, battery cost, charging infrastructure and supply chain localisation driving the adoption of EVs in various segments in the country over the next decade.

On the commercial vehicle side, e-buses are expected to lead the category with regulatory push expected to drive this category, rather than TCO.

“We expect EV adoption in the bus category to be about 13 per cent by 2024-25 and segment to be Rs 60 billion (Rs 6,000 crore) by that time.

“Light commercial vehicles (less than 3.5 tonnes) in the EV category also make TCO sense and we forecast about 4 per cent EV adoption in this segment by FY25, translating into a Rs 15 billion (Rs 1,500 crore) market opportunity,” Singhal said.