Indian Auto sector is going through a long-term structural slowdown

[Bilal9]

NEW DELHI: Automobile industry in India is going through a long-term structural slowdown as the compound annual growth rate (CAGR) across all major vehicle segments has witnessed a decline over the last three decades, as per industry body SIAM. The auto industry has been facing headwinds even before the COVID-19 pandemic derailed the entire sector last year, a research conducted by the Society of Indian Automobile Manufacturers (SIAM) has revealed.

The study clearly shows that the pandemic is not the only reason for the auto sector slowdown, which is facing deeper structural issues that need attention, the industry body noted.

According to the research, which focused on industry growth rates till March 2020, compounded annual growth rates of all segments, including passenger vehicles, commercial vehicles, three-wheelers and two-wheelers have witnessed a continuous drop over the last three decades.

CAGR of the domestic passenger vehicle industry stood at 12.6 per cent between 1989-90 and 1999-2000. It, however, dropped to 10.3 per cent between 1999-2000 and 2009-10 decade, the research data showed.

The growth rate further dropped to 3.6 per cent in the last decade.

The research further pointed out that contraction in the domestic passenger vehicle segment has been much steeper in the last five years.

From a CAGR of 12.9 per cent between 2004-05 and 2009-10, it came down to 5.9 per cent in the 2009-10 to 2014-15 period.

However, in the last five-year period, between 2014-15 and 2019-20, the CAGR of the passenger vehicle segment has dropped to just 1.3 per cent.

"The numbers show a clear long-term structural slowdown in the Indian automobile market across segments even before COVID pandemic began," SIAM Director General Rajesh Menon noted when contacted over the matter.

For instance, the passenger vehicle market's 10-year CAGR over the decade FY2000 to FY2010 stood at 10.3 per cent which dipped to 3.6 per cent in the decade FY2010 to FY2020, he added.

In the two-wheeler segment, the CAGR has dropped from 9.8 per cent in 1999-2000 to 2009-10 period, to 6.4 per cent in 2009-10 to 2019-20, data showed.

Similarly, the research showed a drastic drop in annual growth rate in the commercial vehicle segment. From a CAGR of 12.7 per cent in 1999-2000 to FY 2009-10, it has come down to just 3 per cent in the last decade.

Further, three-wheeler sales have dropped from a CAGR of 9.8 per cent in the 1999-2000 to 2009-10 period, to just 3.8 per cent in the last ten years.

As per the FY20 statistics, passenger vehicle sales at 27.7 lakh units were the lowest in four years, SIAM data revealed.

Similarly, commercial vehicle sales at 7.2 lakh units were the lowest in three years, two-wheeler sales at 1.74 crore units were the lowest in three years and three-wheeler sales were at lowest in two years at 6.4 lakh units.

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[Protest_again]

Auto sales remain well inside positive territory in January

New Delhi: Driven by the expectations of a V-shaped economic recovery, a majority of vehicle manufacturers started 2021 on a positive note, registering good wholesale growth.

There was also no shortage of positive news in January - roll-out of COVID-19 vaccines, vehicle scrappage policy, coupled with strong improvement in the country's Manufacturing Purchasing Managers Index (PMI) which rose to 57.7 for the month which may have encouraged consumer sentiments and lifted sales.

Notably, a PMI reading above 50 indicates expansion and a print below that means contraction.

Almost all the OEMs are now operating at medium-to-high capacity utilisation levels, albeit steep hike in raw materials prices and auto chips shortage. Barring three-wheelers, sales momentum continued for passenger vehicles, tractors, and commercial vehicles due to a favourable base and low-to-stable inventory amid a rise in personal mobility preference.

PVs showed a sustained upturn

With fuel prices reaching new highs every day, price hike announcements and the effect of pent-up demand and festivities coming to an end, one might expect carmakers to face difficulties in getting their metal out of factory gates. However, beating all these circumstances, passenger vehicle sales for January 2021 were 16% higher than in the same month a year ago owing to a low base and higher demand from first-time buyers.

OEMs in this space remained largely buoyed last month as demand in urban areas too has started showing signs of improvement after the strong growth in rural areas.

According to analysts, some pre-buying effect was also visible in the first half of the month that pushed a large chunk of sale ahead of the price hike in the second half.

In PV segment, some pre-buying effect was also visible in the first half of January that pushed a large chunk of sale ahead of the price hike in the second half.Industry Experts

Market leader Maruti Suzuki that sells one in every two passenger vehicles saw flat sales volume in the domestic market in January at 1,39,002 units majorly due to negligible inventory at dealerships. While its domestic sale of mini and compact segment reported 7.6% decline to 1,02,088 units during the month under review, sales of utility vehicles - Gypsy, Ertiga, S-Cross, XL6, Vitara Brezza- jumped 45% to 23,887 units driven by urban region recovery.

"We are watching white and blue spaces (in the SUV segment) and will try to see if they can increase volumes by introducing new vehicles in that space," the company's management said in a recently-held quarterly earnings call. The SUV share of total volumes for the industry is now at 32%, which is expected to rise to 36%-37% next year.

Sales of Hyundai, the second largest passenger vehicles manufacturer, reflected a similar sharp uptrend on the back of the decent demand for its SUVs, Venue and Creta. The company reported 23.8% YoY increase in domestic dispatches to 52,005 units in January.

In the Utility Vehicles segment, another prime player Mahindra sold 20,498 vehicles in January 2021, compared to 19,455 vehicles in January 2020, registering a growth of 5%. The company's overall sales in the PV segment stood at 20,634 vehicles in January 2021, a growth of 4% over the same period last year.

Veejay Nakra, CEO, automotive division, M&M Ltd, said, "At Mahindra, we have witnessed a growth of 5% in utility vehicles in January. We have also seen strong bookings fueled by continued demand. The supply shortage of micro-processor semiconductors continues to be a serious challenge for the auto industry. Going forward, we are working with our supplier partners to gear up our supply chain and meet the market demand."

The growing consumer appetite for SUVs augurs well for Kia and MG Motors as both the OEMs saw substantial sales growth of 23% and 15%, respectively. "Our supply situation is chasing demand with ramp-up continuing post the maintenance shutdown, and we expect good sales in February and March 2021," Rakesh Sidana, director – sales, MG Motor India, said.

Domestic wholesale volumes of carmakers

OEMs	January 2021	January 2020	Change
Maruti Suzuki	139,002	139,844	-1%
Hyundai	52,005	42,002	24%
Tata	26,980	13,893	94%
M&M	20,498	19,555	5%
Kia Motors	19,056	15,450	23%
Honda	11,320	5,299	114%
Toyota	11,126	5,804	92%
Renault	8,209	7,805	5%
Nissan	4,527	1,413	220%
Ford	4141	4881	-15%
MG Motor	3602	3130	15%
Volkswagen	2040	1102	85%
Skoda	1004	1347	-25%
Fia	394	701	-44%
Total	303,904	262,226	16%

Exports drive two-wheelers sales

While the domestic market remained a bit of a drag because of underperformance of the entry-level, volumes of most of the two-wheeler companies gained exponential growth with the surge in exports.

In the two-wheeler pack, market leader Hero MotoCorp's volumes declined 4% to 4.67 lakh units in January while exports were up 34% to 18,113 units.

Bajaj Auto's domestic two-wheeler sales were also marginally lower at 1,57,404 units compared to 1,57,796 units in January last year, the company said.

However, the company posted its highest-ever two-wheeler exports in January at 2,27,532 units compared to 1,74,546 units in the same month last year, a growth of 30%.

Chennai based TVS Motor witnessed a rise in domestic sales and exports at 26% and 43%, respectively.

Domestic sales of key two-wheeler players

OEMs	January 2021	January 2020	Change
Hero MotoCorp	467,776	488,069	-4.2%
HMSI	416,716	374,114	11%
Bajaj Auto	157,404	157,796	-0.42%
TVS Motor	205,216	163,007	26%
Suzuki Motorcycle	57,004	56,013	1.8%
Eicher Motors	64,372	61,292	5%

CVs see green shoot

Commercial vehicles witnessed a sudden jump in demand as manufacturing, and infrastructural activity has started to pick up in the country. With improved cargo availability from the factory gates, the average fleet utilisation rate of heavy trucks has remained stable 85-90%. This has resulted in higher replacement demand coupled with tractions in additional buying as well.

Within the segment, medium and heavy commercial vehicle (M&HCV) volumes at Tata Motors and Ashok Leyland were up 22% and 54% year-on-year, respectively. Along with steady LCV performance, total volumes of the top two leaders were at -2% and 14% in the domestic market.

Industry experts expect M&HCV dispatches to continue their month-on-month recovery due to pick-up in demand for higher tonnage segments from the infrastructure segment amid overall economic recovery.

OEMs	January 2021	January 2020	Change
Tata Motors	30,764	31,348	-1.9%
M&M	13,388	22,851	-41.4%
Ashok Leyland	13,126	11,850	10.8%

Tractor sales on uphill
For the tractor segment, macroeconomics remains conducive mainly on account of a resilient rural economy. Led by Mahindra & Mahindra, the segment leader, the first month of 2021 saw robust tractor sales growth. Aided by healthy farm output and good farm income, M&M Farm Equipment Sector saw a whopping 50% jump in domestic sales to 33,562 units in January as against 22,329 units in the same month year ago.

"Tractor demand continues to be strong with expansion in Rabi acreage, very high reservoir levels and higher liquidity in the hands of farmers with timely Kharif procurement. Demand is expected to remain robust on account of these factors," Hemant Sikka, president- Farm Equipment Sector, (Fill the company's name)

Another key player in the segment, Escorts, said that it was able to service all demand for the first time post lockdown. The company's domestic tractor sales in January 2021 were at 8,510 units, up 45.6% against 5,845 tractors in January 2020.

"The supply-side situation is normalising and is no longer expected to be a bottleneck to meet demand. However, rising inflation continues to be a worry," Escorts said.

Sonalika Tractors sold 8,154 unis in the domestic market in the month of January 2021, as against 5,585 in the same month last year, witnessing a growth of around 46%.

OEMs	January 2021	January 2020	Change
M&M	34,778	23,116	50.4%
Escorts	9,021	6,063	48.8%
Sonalika Tractor	10,158	7,220	40.

 

[Protest_again]

@Bilal9 Billi, please stop with selective reading. Lol. What India sells in a month is over 100 times your annual sales. You are beneath to even QUOTE our auto sector.

Passenger vehicle sales grow for sixth straight month

 

[PakistaniAtBahrain]

What India sells in a month is over 100 times your annual sales.

then India shouldnt talk about China or USA because they sell a lot more than India. but of course you wont keep your mouth shut about them, would you little hypocrite?

You are beneath to even QUOTE our auto sector.

he isnt beneath anything. he posted a legit article, from a legit source. if you want an echo chamber, then go to your indian websites and live there.

 

[siegecrossbow]

After reading this thread now I understand why the Bangladeshi members hate Indians even more than the Pakistanis members.

 

[IblinI]

Like we could care less about them, their country is pretty much our vassal state.

After reading this thread now I understand why the Bangladeshi members hate Indians even more than the Pakistanis members.

 

[Andhadhun]

Automobile Sales in India till Jan 2021,

 

[PakistaniAtBahrain]

Stay away If you have nothing to offer on the subject matter.

likewise. dont comment with nothing but your stupid troll comments.

 

[PakistaniAtBahrain]

Arey idiot, I have always replied with the subject matter. I add my opinion to it. I don't become a troll if you don't like my opinion. At least learn basic internet etiquette. You personally quoting me with no relevance to subject matter discussion constitute trolling.

" Billi, please stop with selective reading. Lol. What India sells in a month is over 100 times your annual sales. You are beneath to even QUOTE our auto sector."

yeah. this was on topic. sure. no trolling, no shit talking involved. sure.

 

[PakistaniAtBahrain]

And yes, that was on topic. We do indeed sell 100 times more in a month. A Bangladeshi calling our auto sector lame is what infact is lame.

Also, you have not understood the context or background to my comment. He has a tendency to put down our auto sector. Everyone here knows that except you nosy. Still, what I posted was mild to what he calls us and I posted an article for reference too in the post. Now butt out.

nobody is talking shit about your auto sector. there is not one thread you dont go into without trolling and shitposting. the OP just stated facts, from a good source, and thats it. you posted facts in your first reply, which was great. then you resorted to trolling and shittalking in your 2nd post. then when i jumped in your as* caught fire.

 

[Protest_again]

nobody is talking shit about your auto sector. there is not one thread you dont go into without trolling and shitposting. the OP just stated facts, from a good source, and thats it. you posted facts in your first reply, which was great. then you resorted to trolling and shittalking in your 2nd post. then when i jumped in your as* caught fire.

Arey yaar, how can I explain to this guy. This is tiring. Every thing has a context. This thread is about some other thread where he was shit talking about Indian cars being tin cans and Bangladeshis only buy expensive cars. He was slapped in the face in that thread with real statistics. So he decided to open a thread with an article that was published over 50 days ago as a revenge. We are slapping him again. Now either you are dumb or have little experience with PDF. I am here for past 12 years watching, observing and lately commenting. Please for god sake mind reply me on the subject.

 

[PakistaniAtBahrain]

Arey yaar, how can I explain to this guy. This is tiring. Every thing has a context. This thread is about some other thread where he was shit talking about Indian cars being tin cans and Bangladeshis only buy expensive cars. He was slapped in the face in that thread with real statistics. So he decided to open a thread with an article that was published over 50 days ago as a revenge. We are slapping him again. Now either you are dumb or have little experience with PDF. I am here for past 12 years watching, observing and lately commenting. Please for god sake mind reply me on the subject.

as if you are some angel who doesnt shitpost in every other thread. especially if its about pakistan.

 

[PakistaniAtBahrain]

Complain to mods, then.

i am glad you accept you are a shitposter at least. yeah, i will report your posts to the mods the same way all you indians report my posts. ciao

 

[PakistaniAtBahrain]

Other than personal comments, you are yet to talk to me on the subject.

i already did talk on the subject. the OP and you are both right. Indian auto sector was struggling prior to lockdown for several reasons, it crashed when lockdown happened, and now its recovering back to what it was prior to lockdown, and same goes for many other sectors. but the same issues that plagued the Indian auto sector prior to lockdown are still present, and this goes for almost every other industry in India, as mentioned by many economists (even those that love BJP). simple. i only jumped in when your shitposting started.

No Indian will care about you. you are just a mild irritant.

yet indians love to care about what pakistanis think and make the effort to come to pakistan defence forum to talk shit. talk about making an effort to be an irritant.

 

[PakistaniAtBahrain]

If we had any better purpose in life we would never have been on PDF, we are useless just like you

expecting a pakistani on PDF is pretty normal. for an indian to be here means he is an obsessive troll.