Auto Sales Preview: Passenger Vehicles Outshine, Uptick In Two-Wheeler Demand In May, Say Analysts
Commercial vehicle dispatches are expected to be subdued as consumers advanced their purchases in anticipation of a price hike.
Sales of passenger vehicles and two-wheelers are expected to outshine other categories due to large pending orders and continued recovery in rural markets in May, according to analysts.
Two-wheeler dispatches to dealerships have started picking up in rural markets despite the momentum being higher in 125cc and above categories, while the passenger vehicle sales will benefit from strong demand for SUVs and improvement in waiting periods, brokerages said.
The demand recovery for two-wheelers has remained fickle. Retail sales for the category fell over 7% in April, after growing more than 12% in the year ended March, data from the Federation of Automobile Dealers' Associations showed.
"The 2-wheeler segment continues to face challenges, with entry-level vehicles attracting fewer buyers," FADA said in the April sales report. The dealers lobby urged the GST Council to consider reducing GST on scooters and motorcycles from 28% to 18% to help revive this segment contributing 75% of total auto volume.
The government's decision to reduce subsidies on electric two-wheelers is likely to lower sales in the category.
Under the second phase of the Faster Adoption and Manufacturing of Electric Vehicles in India, or FAME scheme, the subsidy for electric two-wheelers was reduced to Rs 10,000 per kilowatt hour of battery capacity from Rs 15,000 earlier, while the overall incentives were capped at 15% of the vehicle’s ex-showroom price, a steep cut from 40% earlier.
In the passenger vehicle segment, the impact of chip shortage may be higher than recent months as carmakers continued to flag lower supply of a few specialised semiconductors.
"Our interactions indicate up to 10% hit on volumes due to chip shortages, resulting in lower inventory for high-end models/variants across OEMs (carmakers)," Motilal Oswal Financial Services Ltd. said in a note.
Commercial vehicle dispatches are expected to be subdued as consumers advanced their purchases in anticipation of a price hike. End customers pre-poned the purchases to March as implementation of BS VI Phase II emission norms led to higher vehicle prices from April.
Dolat Capital Research and Development said the light commercial vehicles were showing signs of weakness due to inflation as it was a price-sensitive segment.
Dispatches from tractor makers may fall as indicated by decreasing enquiry levels, analysts said.
While unseasonal rain impacted crops and tractor sales in certain states last month, Mahindra and Mahindra Ltd. said recently that the El Nino's impact on sales was not supported by data over the years.