Auto sales show solid bounce in July; tractors in a fast lane

Mumbai: Automakers showed solid rebound in July sales, though the numbers came in lower on a year-on-year basis for all segments barring tractors on account of Covid-19 disruptions. The numbers improved across the board on a sequential basis.

Apart from demand issues, supply-side pressures are also weighing on auto companies in light of the pandemic.

Tractor sales, though, bucked the trend on the back of a normal monsoon, robust sowing and higher government expenditure in rural areas.

Top carmaker Maruti Suzuki said its sales in July came in at 108,064 units, a decline of 1.1 per cent from a year ago, but a jump of 88.2 per cent from the month before.

This includes domestic sales of 100,000 units and 1,307 units for other OEMs in the domestic market, while the company exported 6,757 units in the month.

Last week, Maruti Suzuki reported Rs 249 crore quarterly loss, first since its listing in 2003, but said it was seeing more first time buyers coming to its dealers. However, replacement buying has fallen.

Mahindra & Mahindra’s overall automotive sales – domestic and exports - stood at 25,678 units in July, compared with 40,142 units a year ago.

In the passenger vehicles segment, Mahindra sold 11,025 vehicles in July against 16,831 a year before.

In the commercial vehicles segment, the company sold 13,103 vehicles in July 2020, as against 15,969 vehicles a year ago. Exports for the month of July were at 1,467 vehicles.

Mahindra & Mahindra’s Farm Equipment Sector (FES) said its total tractor sales (domestic + exports) during July were at 25,402 units as against 19,992 units for the same period last year. Domestic sales in July were at 24,463 units, as against 19,174 units a year ago. Exports for the month stood at 939 units.

“These are our highest ever July (tractor) sales. The strong demand momentum continued, aided by positive sentiments due to good cash flows to farmers, higher Kharif sowing, a timely and normal monsoon cumulatively across June and July and continued higher rural spending by the government,” said Hemant Sikka, President - Farm Equipment Sector, Mahindra & Mahindra.

Sikka admitted that localized lockdowns in certain states and Covid-related impact on specific suppliers led to supply side challenges during the month, but he expects the sentiment to remain buoyant translating into robust tractor demand in coming months.

Escorts said its domestic tractor sales in July came in at 4,953 units registering a growth of 9.9 per cent against 4,505 units from a year ago, while its export tractor sales in July stood at 369 units, registering a growth of 3.9 per cent against 355 units sold a year ago.

The company said it faced some supply chain challenges in July, especially with a few suppliers of proprietary items, and hence it could operate only at about 50 per cent of its capacity, resulting in unfulfilled demand.

“The situation has been continuously easing in the last few days of July, and hence we expect to go back to full capacity anytime up to mid-August 2020,” Escorts said in a press release.

“The supply side situation may continue to be dynamic for another couple of months. Our inventory levels, both with the company and with channel, continues to be at very low levels. We are optimistic for the coming months as the rural sentiments continue to remain positive, led by a timely and widespread monsoon, higher sowing of Kharif crop and adequate availability of retail finance,” it added.