Festive mood lifts automotive purchases in October, eases inventory pressure for automakers

October brought good tidings for India's automobile market, with a string of festivals giving a welcome lift to sales that have remained on the slow lane for most of the year.

Driven by consumer enthusiasm around Diwali and Dhanteras, retail sales of passenger vehicles (PVs) jumped nearly 20% from a year ago, industry estimates showed. However, automakers keen to end the festive season with lower stocks kept wholesale dispatches to dealers relatively flat.

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"We did an all-time high retail of 2,02,402 in October," said Partho Banerjee, senior executive director of Maruti Suzuki, India's largest passenger vehicles maker. "As a result, our network stock has now come to a very comfortable level of one month." A network stock of one month implies stocks at dealers can be cleared out in a month's time. Also, the surge in sales allowed Maruti to reduce factory stock close to zero, Banerjee said.

Compact SUV Brezza topped the charts for Maruti Suzuki with 24,237 units sold, followed by the new Swift (22,303 units) and the WagonR (21,114 units). The WagonR did "extremely well" despite the general view that hatchbacks have slowed down, Banerjee added.

MSI's domestic wholesales drop

Maruti Suzuki reported a 2.3% drop in domestic wholesales, while Tata Motors' domestic dispatches were down 0.4% and Hyundai reported a marginal 0.8% increase in domestic factory-gate shipments. On the other hand, Mahindra & Mahindra and MG Motor India saw a 24% and 31% increase, as they pushed their new models to their dealers. Toyota Kirloskar Motor clocked a 41% increase in wholesale dispatches.

Industry experts observed that though October was promising, it needs to be seen in a broader context, as wholesale figures could moderate in November.

“October wholesale growth on a YoY basis was expected to be strong across PVs, two-wheelers, and tractors since the festive season was preponed this year. Retail growth in the festive season has been approximately 8% for PVs and 12% for two-wheelers, which is encouraging,” Jay Kale, executive vice-president at Elara Capital explained. However, Kale warned that November may see tempered wholesale growth, adding that a full impact assessment would require analyzing the September to December retail and wholesale trends.

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This cautious approach reflects broader challenges in the automotive sector, which, over the past year, has contended with a mix of high temperatures, supply chain disruptions, and fluctuating consumer demand. "This year, Dhanteras and Diwali worked much, much better than last year for the industry,” said Maruti Suzuki's Banerjee, pointing out that in the previous festive seasons, the industry was struggling with vehicle shortages and semiconductor issues. While these bottlenecks have eased, demand remains somewhat restrained outside of the festival months, particularly as factors like elections and excessive rainfall and floods came into play in the beginning of the fiscal year.

Maruti Suzuki's Banerjee estimated that overall retail sales for October would range from 470,000 to 490,000 units, up 20-21% from the 390,000 units recorded during the same period last year.

Stronger over last festive season

Registration data on the government's VAHAN portal typically updates with a lag. Many regional transport offices (RTOs) are also closed for festivals like Diwali, which can delay registrations. October's retail growth year-over-year is also stronger as last year’s festive season was split between October and November, whereas this year, it was concentrated entirely in October.

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Gaurav Vangaal, an analyst at S&P Mobility, suggested that while the October retail sales figures signal some relief, the industry could face new pressures as the year closes. “Recent retail sales figures have brought some relief to the industry, potentially stabilizing production schedules for the rest of the year. The situation will become clearer in January to March, as steeper December discounts are anticipated to help correct inventory levels further,” Vangaal said.

Looking ahead, automakers and analysts alike are bracing for a slight slowdown in November’s wholesale numbers, with hopes that year-end discounts will buoy consumer interest.