Auto Sales Dampened in the Month of May. Will it Bounce Back? - Views on News from Equitymaster

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  • Jun 2, 2021 - Auto Sales Dampened in the Month of May. Will it Bounce Back?

Auto Sales Dampened in the Month of May. Will it Bounce Back?

Jun 2, 2021

India continues to battle the second wave of covid-19.

The slowdown due to covid has not only taken a toll on the Indian healthcare system but has also affected other industries, especially the auto sector.

The auto industry was hoping for a revival this year after the pandemic decimated sales last year.

However, the surge in new cases compelled several automakers to shut down plants last month, leading to low sales figures in May 2021.

Let's take a look at how major auto companies fared.

Hero MotoCorp sales fall 51% in May

India's largest two-wheeler manufacturer, Hero MotoCorp sold 1.8 lakh units in May, compared to 3.7 lakh units in April.

Hero MotoCorp's sales fell 51% over the last month due to the closure of plant operations amid second wave of coronavirus. Year on Year (YoY), the sales are not comparable due to lockdown last year.

The company said it continues to monitor the situation closely and will move to double-shift production gradually.

Its motorcycle sales fell by 47% to 1.8 lakh units in May compared to the month of April.

Scooter sales too declined to 4,338 units in May from 32,956 units in April.

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Maruti Suzuki's total sales plunge 71% in May

Maruti Suzuki India posted total sales of 46,555 units in May, the country's largest automaker said in a statement. It includes domestic sales of 33,771 units.

This is a de-growth of 71% over the 1.6 lakh units it sold last month.

Total passenger vehicle sales fell 76% to 32,903 units in May from 1.4 lakh units last month.

The company's exports rose to 34% to 11,262 units in May.

Mini and compact vehicle segment fell 79% to 25,103 units in May over last month.

Utility vehicle sales fell 75% to 6,355 units in May over last month.

Much like almost every other original equipment manufacturer (OEM), Maruti Suzuki has had to wade through troubled waters last month due to the lockdowns and restrictions announced in most states.

Eicher Motors' sales fall 49% In May

Eicher Motors, the maker of India's cult cruiser motorcycles, saw its sales fell to 27,294 units in May compared to 53,298 units it sold in April.

Sales of models with engine capacity up to 350 cc fell to 22,734 unit from 46,651 units in April.

Sales of models with capacity over 350cc fell to 4,560 units from 6,737 units.

The company's total exports however rose by 60% to 7,221 units.

Apart from that, Volvo Eicher Commercial Vehicles (VECV), the commercial vehicle arm of Eicher Motors, sold 1,223 units in May 2021, down by 43% compared to 2,145 units sold in April 2021.

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VECV's total sales have increased by 78% from 686 vehicles sold in May 2020.

While total domestic sales declined by 57.8% to 656 units, total exports fell by 4.1% to 519 units in May 2021 over April 2021.

In May 2020, VECV's domestic sales and exports were at 430 units and 231 units, respectively.

Total sales of Volvo trucks and buses have declined by 2% to 48 units in May 2021 over April 2021, but has increased 92% from 25 units sold in May 2020.

Tata Motors car sales fall 40%

Passenger vehicles (PVs) contributed towards a big chunk of the total domestic sales.

The company sold 15,181 cars in May 2021, which is still a 40% drop compared to the month before when the company sold 25,095 units.

Overall Tata Motors' domestic sales fell 38% to 24,552 units in May from 39,530 units it sold in April.

Total domestic commercial vehicle sales fell to 11,401 units in May, compared to 16,644 units in April.

Commercial vehicle export too fell 8% to 2,030 units.

Bajaj Auto posts 114% sales growth in the month of May

The two-wheeler maker, Bajaj Auto reported strong sales numbers for the month of May, led by exports.

It reported 114% growth in its total vehicle sales at 2.7 lakh units in May compared to the same month last year.

Bajaj Auto had sold 1.3 lakh vehicles in May last year.

However, the sales were down 30.2%, sequentially, from 3.9 lakh units in April 2021.

The total domestic sales logged 52% growth at 60,830 units as compared to 40,074 units sold in May 2020, while the total exports spiked 142% to 2.1 lakh units over 87,054 units shipped out in May 2020.

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The total two-wheeler sales increased 113% to 2.4 lakh units in May 2021 from 1.1 lakh units in the same month of 2020.

TVS Motor Company sells 1.6 lakh units In May

TVS Motor Company reported a 30.2% fall in total sales to 1.7 lakh units in May over last month due to lockdowns in many states.

The Chennai-based two and three-wheeler maker had sold a total of 2.4 lakh units in April.

'We have reduced dealer stocks to support our dealers and channel partners and will produce to maintain adequate inventories for customer demand. We expect that pent up demand will return as markets begin to reopen,' the company said in statement.

The total two-wheeler sales during the month stood at 1.5 lakh units as against 2.3 lakh units last month.

The domestic two-wheeler sales stood at 52,084 units in May

Its motorcycles sales fell by 6% to 1,25,188 units in May

TVS Motors' total exports stood at 1.1 lakh units in May up from 1.07 lakh units last month.

Three-wheeler sale stood at 12,473 units in May.

Ashok Leyland sells 3,199 units In May

Ashok Leyland reported an overall sales of 3,199 units in May, according to the company's exchange filings.

The automaker's sales fell by 62% over the last month as demand takes a hit amidst second wave of coronavirus

Domestic sales fell sharply to 2,738 units from 7,961 units last month.

The domestic medium and heavy commercial vehicle sales tanked 62% to 1,513 units in May.

The company's domestic light commercial vehicle sales too fell to 1,225 units in May from 3,978 units last month.

Escorts tractor sales decline in May

Escorts agri machinery segment sold 6,423 tractors in May.

The automaker's tractor sales declined 7.9% over the last month.

In domestic market, it sold 6,158 units, while in exports, it sold 265 units.

Slowdown in demand is seen due to impact of Covid-19 in the rural parts impairing movement of customers and smooth operations of our dealerships, the company said in the statement.

  • 'The ground situation has somewhat eased in the last few days of the month, and we expect return to normalcy soon.'

In the medium term, escorts see rural sentiment to be strong, on account of all positive macroeconomic factors viz. prediction of a good monsoon, high crop production, and better support by government on crop prices.

Although, inflation continues to be a worry.

Here's the stock price details of the above automobiles stocks.

HERO MOTOCORP 2,972.5 2,970.0
MARUTI SUZUKI 7,185.0 7,185.5
EICHER MOTOR 2,674.1 2,675.0
TATA MOTORS 323.0 322.9
BAJAJ AUTO 4,299.0 4,294.3
TVS MOTORS 616.0 618.0
ASHOK LEYLAND 124.2 124.0
ESCORTS LIMITED 1,162.5 1,162.2
Source: Equitymaster

The S&P BSE AUTO Index is currently trading at 23,541 (up 0.3%). The index is up 8.6% over the last 30 days. Over the last 1 year, it has gained 61.8%.

Within the automobiles sector, the top gainers are Tata Motors DVR (up 1.4%) and Force Motors (up 1.0%).

On the other hand, Escorts (down 0.8%) and Hero MotoCorp (down 0.2%) are among the top losers.

Equitymaster's View on Automobiles Sector

We reached out to Brijesh Bhatia, Research Analyst at Equitymaster, and Editor of the premium monthly recommendation service Fast Profits Report, for his view on the sector.

Here's what he has to say...

  • Auto Index is trading at 13-weeks high of 10,600 levels after breaking out of bullish head and shoulder pattern.

    After testing the high of 11,093 in February 2021, index retraced by 27.6% of the move from March 2020 low of 4,452 to 11,093 high at 9,345 and resumed it bullish journey.

    The medium to long term trend for auto sector looks bullish but stock selection would be the key for investors.

    I believe the lockdown pain is temporary impact but the company which has proven record of coming back strongly from bad times should be on investors watchlist.

How was the auto sales data for May 2021?

The severe second Covid-19 wave brought back pain for India's automakers.

Their sales slumped over the preceding month on fresh lockdowns in several states and companies suspending manufacturing.

According to a leading financial daily, factory-gate shipments of passenger cars, two-wheelers and commercial vehicles is expected to tumble in the range of 14-73% month on month in May.

Shipment of automobiles over the year earlier is not comparable because of a low base caused by a nationwide lockdown to contain the first wave of the pandemic.

The mounting infections had prompted automakers such as Maruti Suzuki India, Hero MotoCorp, Escorts, and Eicher Motors to shut down plants in a staggered manner to mitigate the high inventory levels at dealerships, lowering production.

Going forward, many companies do expect a strong rebound in sales once lockdown restrictions start to ease out.

For more details about the sector, you can have a look at the automobiles sector report on our website.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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