Auto wholesale billings to moderate as peak festive season ends: Ind-Ra

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SME Times News Bureau | 30 Nov, 2020
With the festive season now over in India, India Ratings and Researchers expects wholesale billings to moderate in the next couple of months, given that the inventory has already reached to a high level.

The ratings agency, in a report, pointed out that the inventory at dealer level for PVs (passenger vehicles) and 2Ws (two-wheelers) is already at higher than the 21 days recommended by Federation of Automobile Dealers Association (FADA).

However, it expects the overall automotive industry to continue to revive in the next two to three months, in line with the improving economic indicators.

According to the agency, domestic automobile industry (excluding CVs) reported year-on-year (yoy) growth for the third consecutive month in October 2020, up 14 per cent YoY.

In fact, PVs and 2Ws sales volumes continued the growth trend, up 14 and 18 per cent on YoY basis, respectively, driven by increased consumer proclivity for personal mobility.

Besides, higher sales volumes in October were also to cater the increased demand during Navratri, the report cited.

Furthermore, original equipment manufacturers (OEMs) chose to continue to stock up the dealership inventory ahead of Diwali in November, banking on a likely strong demand.

"In contrast, while retail sales volumes continue to see growth on a month-on-month (mom) basis, it remains a far cry from the FY20's levels, barring PVs," the agency said in the report.

"While retail registrations of PVs fell only 9 per cent YoY in October 2020, for 2Ws, CVs and 3Ws, the decline was much larger at 27 per cent, 30 per cent and 65 per cent YoY, respectively, suggesting that demand at the consumer level is yet to reach the pre-Covid levels despite the festive season tailwind."

As per the report, both Navratri and Diwali fell in October in 2019 while Diwali was in November this year.

"Overall, PVs have fared better than the other segments backed by strong sales of the entry level cars and utility vehicles as customers continue to prefer personal mobility."

In addition, the ratings agency pointed out that while 2Ws have also performed better, boosted mainly by strong motorcycle sales in rural markets, it remains affected because of lower sales in urban areas.

"This is because the low-income group consumers continue to shy away from discretionary purchases. While both PVs and 2Ws continue to benefit from the strong demand from the rural markets, it has not been adequate to compensate for the lower demand from urban areas," the report elaborated.

"Furthermore, 3Ws and CVs, especially medium and heavy CVs, continue to struggle amid the decreased use of public transport and the overall slowdown in economic activity, respectively."