Auto sales likely to see sequential growth in next 2 months: Report

Automobile sales are likely to see a sequential improvement over the next two months even as the year-on-year decline is expected to continue up to December quarter due to disruptions related to the coronavirus pandemic, Reliance Securities said on Thursday.

Automakers across segments reported improved performance in volume at 10-70 per cent of usual sales in domestic markets on a sequential basis in June on account of lifting of lockdown in major part of the country, Reliance Securities Ltd said. Sales, however, were down by 30-90 per cent on a yearly basis.

The tractor segment reported strong volume despite current tough situation owing to positive sentiment following a healthy Rabi output, it said.

Both auto and two-wheeler manufacturers reported higher sales in June over May on the back of pent-up demand and revival of economic activities following Unlock 1.0, with some of them even logging growth almost to the pre-Covid level.

"We expect sequential improvement in volume performance over the next two months, while YoY decline would continue till 3QFY21, due to ongoing the impact of Covid-led disruptions," said Mitul Shah, VP (Research) at Reliance Securities.

The automobile industry is expected to recover with a lag effect of one-quarter post-economic revival, Shah said, adding, "We expect industry volume to record double-digit volume decline in FY21E, except the tractor segment."

On the other hand, the tractor and 2-wheeler industry is likely to see a faster recovery within the automobile segment due to the rural market being better placed compared to other markets, he said.

Most of the automakers started operations during May albeit at much lower utilisation level, while in June utilisation improved significantly, Shah said.

"At the end of June many companies indicated utilisation touching 70-90 per cent of pre-Covid level. This helped their wholesale dispatches, while the inventory at dealers' level supported the retail sales," he said.

"We believe that retail sales were 5-15 per cent ahead of wholesale in tractors, PVs, and 2Ws, which was the other way round for the CV segment. On the other hand, exports sales were better for OEMs with lower decline,''Shah added.

Broadly dealer inventory was reduced by around one-week during the month, he said.