Auto sales failed to ride on festive season as November numbers disappoint, analysts list reason for muted demand

Despite the festive season, the November auto sales failed to shine year-on-year on multiple reasons including earlier exhaustion of pent-up demand and amid ongoing chip shortage issue, analysts pointed. Most auto companies released their sales number on Wednesday.

They believe the commercial vehicle segment witnessed an uptrend as compared to personal vehicles and premium motorcycles mainly due to supply chain issues. Similarly, the tractor segment also saw so far low sentiment amid mute rural sentiment.

See Zee Business Live TV Streaming Below:

The analysts were of the view that the overall impact of the high base of last year has impacted the November auto sales number which has been an overall disappointing month.

“Auto sales in November 2021 were impacted by chip shortage in passenger vehicles, light commercial vehicles, and the domestic premium motorcycle segment,” Arun Agarwal, Deputy Vice President - Fundamental Research, Kotak Securities said in a note.

The passenger vehicle segment saw healthy inquiries and booking in the festive season and thereby volumes in this segment are expected to improve once the chip shortage situation gets resolved. In the commercial vehicle space, the medium and heavy commercial vehicle segment continued their gradual recovery supported by improved fleet utilization levels,” Agarwal further added.

“The tractor industry and domestic two-wheeler industry sales volumes declined in November 2021 on account of delays in Kharif crop harvesting and channel destocking, the analyst added. 

While Emkay said that the uptrend in domestic CV volumes continued, other segments were weak due to mainly supply issues, muted rural sentiments and a high base of last year.  

“Improving chip supplies is expected to aid a sequential improvement in volumes for PVs and premium motorcycles ahead. The delayed harvest of Kharif crops affected rural cash flows and demand. This is expected to be a temporary phenomenon, and cash flows should start improving as soon as the Kharif harvest gets fully monetized,” the domestic brokerage firm further added.

“The base month of November 2020 marked a rapid revival in almost all sectors barring CVs. Last year by this time, in line with fast rural recovery, 2Ws and tractors had majorly recovered leading to a high base in November, LKP Securities said in an auto round up note on Thursday. 

The brokerage firm added, this year managements of OEMs mentioned that the pent up demand has ended by September this year. In FY22, post the much more intense second wave of covid, the rural markets are still badly impacted and are taking more time to recover than expected. 

LKP Securities also said, there has been a delay in harvesting of Khariff crops due to late monsoon, impacting rural cash flows and retail demand in the rural markets. This impacted the 2Ws entry segment and tractors.