SURGING CAR SALES – SUSTAINABLE?

Call it pent up demand or the effect of the pandemic or even the lure of easy availability of finance and low interest rates; whatever be the reason, automobile companies are not complaining.

Market leader, Maruti reported a 18% (YoY) jump in sales at 1,63,656 units for Oct. This is higher than its Sept sales at 1,60,442 units though YoY, Sept had shown a growth of 31%.

The second largest manufacturer, Hyundai Motor reported a historic, highest-ever domestic monthly sales at 56,605 units, up 13% (YoY). QoQ, it is up from 50,313 units.

Two-wheeler, Hero MotoCorp also reported a ‘historic’ sales for Oct at 7,91,137 units, up 35%. For Sept, it was at 7,15,718 units. This has indeed been one of its most spectacular monthly growth recorded ever.

Escorts had a fantastic month – it also reported a historic, highest-ever monthly sales for Oct at 13,664 units, up 2.3%. In had reported a sales of 10,855 units in Sept. The company, which sells tractors, said that it was operating at almost 100% capacity with demand outpacing supply, resulting in lower-than-normal inventories. Here, the demand was driven by higher crop production, good crop prices, easy availability of finance and good monsoon.

Oct sales of M&M were dragged down mainly by 23.5% drop in CV sales. But on the passenger vehicles front, it did well, registering a 1% growth at 18,622 units and 3% growth in utility vehicles. Tractor arm too saw a 2% growth at 46,558 units sold.

Royal Enfield maker, which is Eicher Motors saw a 7% decline in sales for Oct at 66,891 units. Though, this is much better than the 60,041 units it sold in Sept – sequential growth has been good.

Other auto companies are expected to report their Oct sales today but overall, the trend is expected to be very good. The festival of Navartri, Dassera and now Diwali will boost sales into November and maybe till end of the year when companies typically give away discounts.

But the underlying truth in all these surging car sales numbers – this no indication of a sustainable economic bounce back yet, in the true sense. The only barometer which shows growth are truck sales – unless we see three months of consistent growth in commercial vehicle (CV) numbers, we cannot say that we are out of the woods yet.

And that’s why, these numbers of historical high car sales seem just that – historical. Sustainability is most certainly a question mark. What we know for certain though – these companies are going to post much better earnings in Q3FY21.