India Ratings and Research (Ind-Ra) has published the January 2021 edition of its credit news digest on India’s auto sector. The report highlights the trends in the sub-segments of the auto sector, including passenger vehicles (PVs), commercial vehicles (CVs) and two/three-wheelers (2W/3Ws), with a focus on sales volumes growth, market share movement, change in commodity prices and recent rating actions.

The domestic automobile industry (excluding CVs) reported sales volumes growth of 5% yoy in January 2021, led by 11% and 7% yoy growth in PVs and 2Ws sales volume, respectively. Improving consumer sentiments amid the roll-out of COVID-19 vaccines coupled with new launches have helped the PV segment, in particular, to continue the sequential growth trend in January 2021. 2W sales have been lower than that for PVs, impacted more by the price hikes taken by original equipment manufacturers (OEMs). 3W sales, declining 57% yoy, are yet to see an uptick in demand in India, since the onset of the pandemic in March 2020.

PV retail sales volume, although down 4% yoy, continued the month-on-month growth trend in January 2021, up 4% from December 2020. Incidentally, retail PV sales continued to be better than the wholesale sales in January 2021, indicating positive consumer sentiments despite the price hikes in January 2021 to partly counter the increasing input costs. 2W demand, on the other hand, seemed to be impacted more by this corrective measure. After recording 1.4 million registrations in December 2020, as customers chose to pre-buy 2Ws ahead of the announced price hikes from January 2021, retail registrations in January 2021 dropped a whopping 18% over December 2020. CV retail sales volume, albeit still a far cry from pre-covid levels, continued the upward trend, up 9% mom in January 2021.

Figure 1
PVs Lead Domestic Sales While 2Ws Excel in Exports over 10MFY21


Wholesale dispatches of PVs compared to retail registrations for a third consecutive month in January 2021 has led to a low PV inventory at the dealership level, which declined to 10-15 days in January from 15-20 days at end-December 2020. The 2W inventory at the dealership level remained steady at 30-35 days at end-January 2020 as dispatches by OEMs reflected the lower 2W retail registrations in January 2021. While the near-term supply-side constraints could lead to a lower sales volume in 4QFY21 on a quarterly basis, given the lower base of 4QFY20, volumes are likely to continue to grow on a yoy basis, aided also by improving consumer sentiments amid a steady improvement in Indian economy. 

2W exports, up 26% yoy, continued to outperform domestic 2W sales in January 2021. For 10MFY21, 2W domestic sales had dropped 20% yoy compared to the 14% yoy decline in 2W exports volumes. Similarly, 3W exports continued to fare significantly better than domestic sales, having declined only 28% yoy in 10MFY21 compared to the 72% yoy decline in domestic 3W sales. PVs tell a contrasting story, with exports dwindling 43% yoy compared to the only 13% yoy decline in domestic sales. A higher demand for utility vehicles and a strong festive season demand in India led to the PV industry outperform the 2W/CV/3W industry domestically in January 2021. Exports have benefited from the steadier demand scenario over 10MFY21, declining 20% yoy, however domestic sales volume lag slightly behind with 22% yoy decline despite a steady uptick in sales since September 2020. 

With the global auto industry reeling from the acute semi-conductor shortage and as auto OEMs prioritise production schedule, overall production levels could lower over the near-term. This was apparent more in PVs with January 2021 production declining 2% yoy. Over November 2020-January 2021, PV dispatches by OEMs were around 794 thousand units compared to 844 thousand retail registrations. Lower wholesale dispatches of PVs than retail registrations for a third consecutive month in January 2021 led to a low PV inventory at dealership level, which had declined to 10-15 days in January from 15-20 days at end-December 2020. 2W inventory at the dealership level remained steady at 30-35 days at end-January 2020 as dispatches by OEMs reflected the lower 2W retail registrations in January 2021. 

Source: Society of Indian Automobile Manufacturers (SIAM), Federation of Automobile Dealers Associations (FADA) and Ind-Ra


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