Car makers have sold close to 50000 units in the states of Maharashtra and Kerala during the key festivities in August, which usually attracts higher numbers of bookings and deliveries. This is for the first time in three years that car makers have notched double digit growth in sales during the key festive season.
Maharashtra and Kerala usually account for about 17% of the total sales for car makers, however in the month of August, the share of both the states increased to 22% of total retail sales of about 232000. Usually a good start of Ganesh Chaturthi and Onam paves way for a healthy festive season for the rest of the country.
Shashank Srivastava, ED, sales and marketing at Maruti Suzuki says a straightforward comparison of retail sales data over last year will not be fair because of floods in Kerala last year and other economic factors had impacted sales adversely and hence the double digit growth in the Onam and Ganesh Chaturthi festival season should be seen in the perspective of depressed numbers of last year leading to a low base.
“Nevertheless, the beginning of the festival season that kicks off from Kerala and then Maharashtra is encouraging and the industry has taken a collective sigh of relief. However, the continued uncertainty in the market due to Covid and the economic situation has made that sigh a little muted,” added Srivastava.
Sustained demand has ensured that at an industry level inventory for passenger vehicles remained at about three weeks or 1.75 lakh units compared to 2.32 lakh despatches in August.
However, the inventory position is set to be inflated in September, with capacities getting ramped up on one hand and due to the inauspicious shradh period, prospective buyers will either defer the booking. So there is a possibility that by the end of September the stock at dealers may increase to over five weeks.
To be sure, the industry is not out of the woods yet. The low base of last year and pent-up demand is reflecting in positive numbers. Also, the first five months sales average in FY-21 is at about 1.15 lakh due to lockdown versus 2.3 lakh per month in FY-20, so clearly there is a pent-up demand and Covid-19 has also triggered the need for personal mobility.
“Sales are still much lower than the first half of FY-18-19, when demand was driven by fundamentals of the economy. At present, erring on the side of lack of supply will be unpardonable because once the pent-up demand is satiated and festive excitement ends, it will come down to GDP growth, which is down by a significant double digit,” said a senior executive at the top three car maker, requesting anonymity.
For the two wheeler segment, Maharashtra and Kerala account for 15% of the total sales and both the states registered a steep decline for five quarters.
Hero MotoCorp registered a healthy growth over the previous season, with bookings higher than deliveries, indicating stock running out s fast at dealerships.
“During the recent Ganesh Chaturthi, our retail sales in markets across Maharashtra grew by a healthy double digit over the same period in the previous year. We remain cautiously optimistic for the sales to continue their upward trajectory with favourable factors such as the upcoming festive season, increasing consumer confidence and continued government policy support,” a Hero Motocorp spokesperson said.
The company said demand was well spread out across rural and urban markets and the inventory at the end of Q1 was around 30 days, the company will gradually build stock for the festive season.
From a double digit growth in festive season of FY-17, the fortunes of the industry slipped to single digit growth in cumulative sales (August to November) in FY-18, to low single digit to negative growth in FY-19 to double digit negative in FY-20.
August starting on a double digit paves way for a good season ahead for the industry. From accounting for almost 38-40% of the overall sales, the contribution of festive sales has slipped to a third in FY-20, making sales during festivities more or less in line with the rest of the year.