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Auto Monitor: Domestic Auto Industry Woes Continue in January 2020

Updated: February 26, 2020, 05:32 PM IST

India Ratings and Research has published the January 2020 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-wheelers (2Ws), with a focus on sales volumes growth, market share movement, change in commodity prices and recent rating actions.

Domestic retail automobile sales volume continued to decline in January 2020 on lower consumer sentiments, despite heavy discounts, as buyers continued to show proclivity to wait for new launches and for Barat Stage VI to kick in from April 2020. PV, CV and 2W retail sales fell 5%, 7% and 9% yoy, respectively, in January 2020. At the original equipment manufacturers (OEM) level, overall sales volume fell 14% yoy in January 2020.

Existing inventory at the dealership level led to most OEMs continuing to implement production cuts in January 2020. Over April 2019-January 2020, the auto industry undertook an overall production cut of 13% yoy; this translates to around 13%, 26% and 13% yoy production cuts in PV, CV and 2W segments, respectively. Regulated wholesale billing by OEMs led to inventory for PVs decreasing to 15-20 days in January 2020 from 20-25 days in December 2019. Similarly, the average inventory for CVs and 2Ws decreased to 25-30 days in January 2020 from 30-35 days in December 2019.

In January 2020, PV sales volume at the OEM level fell 6% yoy, on account of an 8% yoy decline in the sales volume of cars. Utility vehicle sales volume continued the growth momentum with a 3% yoy increase. CV sales volume at the OEM level declined 14% yoy in January 2020, on a 35% yoy drop in the sales volume of medium and heavy commercial vehicles (MHCV). MHCV sales continued to be impacted by delayed purchases, resulting from weak customer sentiments amid a demand slowdown. Light CV sales fared relatively better with 1% yoy drop. 2W sales volume at the OEM level dropped 16% yoy in January 2020, on a 16% and 15% yoy drop in scooters and motorcycles sales volumes, respectively.

In the PV segment, Maruti Suzuki India Ltd's market share was up by 3% yoy to 53% in January 2020. Tata Motors Limited's market share in CVs remained at a similar level of 41%, while Mahindra & Mahindra Ltd ('IND AAA'/Stable) gained a 4% yoy market share. The 2W market leader Hero MotoCorp Ltd's market share remained stable at 36%.

OEMs continue to adopt regulated wholesale billing amid tepid demand, which has brought inventory at the dealership level closer to the 21 days recommended by the Federation of Automobile Dealers Associations. However, with retail demand likely to remain sluggish, production cuts by OEMs are likely to continue in the near-term.

DISCLAIMER: This information is published as per the press release sent to us. It has not been verified or ratified by OVERDRIVE.

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