Motown stares at a wash-out month due to lockdowns

The COVID-19 led lockdown has hit the automobile industry in the worst manner possible. In today’s feature, we have reviewed the trends that shaped up the industry during the month of May.

The automobile volumes have declined as most regions were under lockdown in May 2021.

Inquiry levels went significantly down and many automakers opted for self-imposed plant closure.

Among the vehicles, the demand for tractors remained comparatively strong.

Passenger vehicles also received strong traction from commuters for personal mobility.

However, demand for 2Ws suffered under the impact of the second COVID-19 wave.

Impacted Operations

Most 2W dealers shut their operations due to the very low inquiry levels. Wholesalers were also impacted due to the plant shutdown.

The inventory level in the system has also gone up to 45-75 days, which is likely to keep the wholesale demand down in the coming few months.

In addition, operations of dealers in the passenger vehicle category were also impacted.

Most dealerships were shut in May 2021. There was also a dip in the inquiry levels and conversion rates.

As per the dealers, not many customers opted for the cancellation of the booking.

However, most of the customers have deferred their purchases till June 2021. The dealers are also experiencing a slowdown in new bookings.

As a result, all the major PV makers are expected to report a decline in volumes for the month of May.

As per a Motilal Oswal report, Maruti Suzuki's volume is expected to decline by ~72% MoM, M&M, and Tata Motors could see volume decline in the range of 55-60%.

The dealerships in commercial vehicle space are mostly located on highways.

Hence, they were least impacted by the lockdown.

However, the demand has been largely impacted due to the lack of economic activities.

And CV makers are expected to see a sharp decline in volumes for May.

Tractors were the least impacted category as operations were curtailed due to the restrictions.

Agriculture demand remained strong but commercial demand was also partially impacted.

As a result, tractor volume is expected to decline by ~20-25% MoM.

Closing Comments

Automobile companies are under pressure. But, the dealers are optimistic about the recovery in demand post-lockdown.

Passenger vehicles are expected to see a faster recovery, while the twowheeler category is expected to witness a prolonged stress period.

Teji Mandi (TM Investment Technologies Pvt. Ltd.) is a SEBI registered investment advisor. Information in this article should not be construed as investment advice. Please visitwww.tejimandi.com to know more.