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Monday, August 03, 2020

First-time buyers, sharp rural recovery and pent-up demand help automakers return to fast lane in July

Honda Cars India sold 5,383 units in the domestic market in July 2020 as against 10,250 units in July 2019.

By: ENS Economic Bureau | New Delhi | Published: August 2, 2020 12:43:01 am
auto business, auto market, automakers, auto demand, demand for cars, indian express Industry insiders say that following the pandemic scare and need for social distancing, a number of new customers are coming to buy their first small car and that is the reason for the uptick in demand for such cars. (Representational image)

Led by a strong rural recovery and demand from first-time car buyers, alongside pent-up demand on account of pandemic-induced lockdown impact in April and May, major automobile manufacturers witnessed a sharp recovery in sales in July 2020.

While Maruti Suzuki India Ltd (MSIL) sold 1,00,000 units in the domestic market, a 1.8 per cent jump over sales in July 2019, Hyundai Motor India sold 38,200 units — 2 per cent lower than domestic sales of 39,010 units in July 2019. The two companies, which have a combined market share of over 70 per cent in the passenger car market in India, registered big growth in sales over June 2020. While Maruti Suzuki nearly doubled its sales in July over June sales of 51,274, Hyundai saw an 80 per cent jump over its June sales of 21,320. Having clocked nil sales in on account of a complete shutdown, in May MSIL and Hyundai India had sold 13,865 units and 6,883 units, respectively, in the domestic market.

Honda Cars India sold 5,383 units in the domestic market in July 2020 as against 10,250 units in July 2019.

July export sales for MSIL stood at 6,757 units and that for HMIL was 3,100 units. “A mix of demand from first time buyers, better rural recovery and pent up demand has resulted in rise in sales. While it is a matter of relief that we have been able to cross July 2019 sales numbers after big battering in 3-4 months, it must be kept in mind that the first half of 2019 was weak and the growth of 1.8 per cent for us is on a low base,” said Shashank Srivastava, ED, sales and marketing, MSIL.

A closer look at MSIL sales numbers shows a clear trend of rise in demand for entry level small cars. For Maruti, the mini segment (Alto and S-Presso) and utility vehicle segment (Brezza, Ertiga, S-Cross etc) led the sales recovery. While the sales of mini segment jumped 49 per cent from 11,577 units in July 2019 to 17,258 in July 2020, that of the UV segment rose 26.3 per cent. The compact segment (WagonR, Swift, Celerio, Ignis, Baleno, Dzire) which accounts for over 50 per cent of the sales of MSIL witnessed a 10 per cent decline in sales over that in July 2019.

Industry insiders say that following the pandemic scare and need for social distancing, a number of new customers are coming to buy their first small car and that is the reason for the uptick in demand for such cars.

Among other car manufacturers, Toyota Kirloskar Motor (TKM) sold 5386 units in July 2020, against sales of 10,423 units in the domestic market in July 2019.

Meanwhile, leading two wheeler manufacturer, Hero MotoCorp announced sales of 514,509 units in July 2020 — a 14 per cent growth over June sales and over 95 per cent of the wholesale dispatch numbers of July 2019.

Stating that the government must do whatever is required to do to ensure public health safety, Srivastava said sudden lockdown announcements by states do create some challenges for us. “In 15 states, there is a local lockdown and 10 states have weekend lockdown. This disturbs the momentum and creates uncertainty in the minds of both consumers and manufacturers,” he said.

There are others who feel sporadic lockdown announcements by states is hurting the business. Stating that lockdown called upon Bengaluru caused TKM to temporarily shutdown our plant for 4 days last month, Naveen Soni, Sr VP, sales & service at TKM, said, “Timely and clear instructions will help industrial units, better plan their production cycles and logistics including workforce and raw material movement”. He said “sporadic lockdowns & extensions being imposed in several parts of the country, lead us to a situation wherein our business was closed upto 20 per cent of the market, in and around mid-July. It was due to rest of the 80 per cent of our business that has helped us close the month with higher than June retails”.

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