- The 2022 festival season has turned out to be a blessing for Indian automakers, with registrations of passenger vehicles, commercial vehicles and tractors in October rising between 35-66% over 2019 levels.
- The struggling two-wheeler segment also witnessed signs of revival with a 5% increase in registrations when compared to the same period in 2019.
- Entry-level passenger vehicles and 2W continued to struggle, while SUVs and premium 2W continue to witness strong demand.
The festival season, which began on September 26 with Navratri and ended on October 24 with Diwali, saw registrations rise by 34-44% year-on-year across passenger vehicles (PV), commercial vehicles (CV) and tractors, according to a report by Jefferies.
On the other hand, the struggling 2W segment is showing signs of revival after sales fell for three consecutive years after peaking in 2018. According to Jefferies, 2W registrations were up 5% in October when compared to the same period in 2019. On a YoY basis, the growth came in at 32%.
“A good festive season bodes well for India's auto demand, which is recovering from its worst slowdown in decades. We expect strong 17-19% volume CAGR for PVs, 2Ws and trucks over FY22-25,” the Jefferies report said, adding that falling metal prices could fuel double-digit earnings CAGR for most companies.
The festive cheer for car makers was visible in their October sales, with
Source: Elara Securities
M&M’s auto division reported stronger growth of 45.8% y-o-y in sales during the month, but its overall growth was tempered by the tractor segment which grew 10.6%. However, analysts at Elara Securities state that tractor sales were above expectations.
Demand in the entry-level segment remained weak with inventory piling up, according to the research firm, while customers continue to throng to SUVs despite the long wait periods.
An extended monsoon has resulted in delayed harvest, and according to analysts at Elara Securities, this has resulted in subdued demand in rural areas for 2W.
Dispatches from Bajaj Auto,
In terms of price points, the entry level segment underperformed the premium segment, while motorcycle demand was weaker than that of scooters.
Market leader Hero MotoCorp reported a 17% decline in its overall sales, Bajaj Auto reported a 10% decline but TVS reported a 1.5% increase y-o-y.
Notably, Bajaj Auto reported a significant decline of 31% in its exports y-o-y, but grew 9% sequentially. The company said in a statement that it expects exports to now increase sequentially each month from here for FY23.
M&M, one of the leading tractor and farm equipment makers, said that the festive cheer has aided demand for tractors and farm equipment.
“Festive season kept the spirits high and led to very strong momentum in demand for tractors and farm machinery,” said
Sikka also said that the outlook for rural demand looks good in the coming months, thanks to the government announcing higher minimum support price (MSP) for Rabi crops and high reservoir levels.
According to a report by Morgan Stanley, high-frequency indicators suggest that the overall economic activity in rural India has been normalising over the past three months, which is another positive sign for auto companies.
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