India’s top auto manufacturers’ combined sales in August was marginally up 1pc to 1.53mn units from prior year marking the end of declining auto sales this year.
Auto sales are expected to rise further resulting in improved demand for the metal sector. Steel manufacturers informed Davis Index that demand from auto industry was quite strong in August and new orders for September have also rolled-in. Consequently, demand for zinc, aluminium alloys and lead batteries is also rising giving support to downstream raw material prices.
Maruti Suzuki, Hyundai sales up
Pick-up in auto business can be attributed to double digit growth reported by major car manufacturer Maruti Suzuki with 17pc jump in August sales to 124,624 units from the prior-year. Domestic auto sales reported by Maruti Suzuki jumped 21pc to 113,033 units.
Hyundai reported a jump of 20pc in August sales from prior-year to 45,809 units but including export, total sales were down 6pc from prior-year.
Increase in sales in August was fuelled by pent-up demand and inventory build-up for the festive season and new car launches. In the next few months, OEMs and auto manufacturers will remain active as the festive season has just begun when people traditionally buy new vehicles. Attractive schemes are also drawing consumers to opt for new cars.
People are also opting for personal vehicle instead of public transport to ensure hygiene in the wake of COVID-19. Also, with the low availability of public transport with metros, trains and busses not operating at all has lead to people purchasing personal vehicles.
One factor that could affect this projected rise in auto sales is unemployment during COVID-19 that has shrunk disposable incomes, stressed businesses and lowered revenues. If public transport resumes anytime soon, auto sales may again take a hit.
In the two-wheeler segment, Hero Motocorp reported its fourth consecutive month of auto sales growth. The company sold 584,456 units in August, up almost 8pc from prior-year. The company said that rural and semi-rural demand is driving demand. Hero is operating at nearly 100pc capacity with nearly all dealerships open.
Mahindra & Mahindra was able to meet the uplift in demand in August as the company managed to overlook the supply chain disruptions. Tractor sales jumped by 65pc in August too primarily due to increase in Kharif sowing area. The company expects rural sentiment to remain strong. Similarly, Escorts Agri Machinery volumes grew 80pc in August from the prior year which is the highest ever August sales at 7,268 units.
|Auto sales by Indian companies in August (Data from company releases)|
|Company||Aug 2020||Aug 2019||Pc Change YoY||July 2020||Pc Change MoM|
|Eicher Motors Bikes||50,144||52,904||-5%||40,334||24%|
|Eicher Motors VECV||2,477||3,538||-30%||2,184||13%|
|M&M (excluding farm sector)||30,426||36,085||-16%||25,678||18%|
|M&M farm equipment sector||24,458||14,817||65%||25,402||-4%|
The improving business in auto industry will result in low inventories and ramp-up of production for the upcoming demand during the festive season. Major part of Q3 will witness a strong economic recovery, which will reflect on metal prices too.