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Can The Festive Season Boost Automobile Sales?

Auto sales have drastically been affected over FY 2011-12 and furthermore since the beginning of FY 2012-13, over Q1. As mentioned earlier, the high cost of funding and soaring fuel costs have been spoiling the picture on the demand side. The festive season of October and November every year is the period to look forward to, to witness a boost in demand. The season flows in with offers on pricing as well as funding, with fuel prices being unaffected for obvious reasons.

Currently there are mixed opinions about the expected sentiment during the season that normally contributes to about 40 to 45 per cent of the total annual sales. While some foresee a possible reversal in interest rate trends boosting demand and growth, others see no change in the condition that we are seeing since the beginning of this financial year.

Nevertheless, firms have lined up new launches for the festive season to boost sales and to make the most of the opportunity. Nearly all the auto firms have plans of launches across different segments according to their current standing and strategy.

On the production front, while there are several companies which had to cut production to avoid inventories from piling up, there have been reports of companies ramping their production up regardless of inventory pile-ups over the last few months. According to a recent media report, Hero Motors is bracing itself up for record production as the festive season is approaching. The firm has asked its suppliers to prepare for volumes of up to 6 lakh units in September, said the report.

Considering the fact that Hero Motors sold a record 6.5 lakh units in October 2011, registering a strong double digit growth over the corresponding month in the previous year, the move to ramp up production is understandable. Over October and November last year, the company had sold more than a million units of two-wheelers and had planned 1.1 million units for this year, which makes the company’s plan well in line with the expectations.

What’s worth noting is that in the two-wheeler industry, the total two-wheeler sales have been mainly driven by Honda which has been consistently posting YoY growth of more than 45 per cent in its monthly sales figures, since the last three months. This has moved the total sales figure higher and the rest of the players have performed moderately or poorly, bearing witness to the fact that if positioned well, there is scope for growth.

Among these, Hero Motors has maintained consistency in displaying the second-highest monthly growth figures. Moreover, Hero’s performance has been consistent over time and the company has not recorded negative growth in the month of June 2012, as done by two of the top four two-wheeler companies. June 2012 also marked the eleventh successive month for the company to record sales of above 5 lakh units a month.

We expect the company to perform well over the months of October and November, though this performance will relatively be better considering the current market conditions. The 25.82 per cent growth witnessed in FY 2011 is no more the benchmark. We are witnessing a slowdown to the extent that monthly growth is in the range of 9 to 11 per cent. Regardless of this, players can now ramp themselves up and capture all the opportunity that the festive season has to offer.

Cumulative Two-Wheeler Sales for FY 2012-13

Cumulative Two-Wheeler SalesAprilMayJune
20122011% Change2012 2011% Change20122011% Change
Total Two-Wheelers 11,57,108 10,43,010 10.94 11,92,688

10,70,603 11.17 11,69,733 10,71,161 9.2
Hero Motors 5,51,557 5,17,099 6.66 5,56,644 5,00,234 11.28 5,34,091 5,12,244 4.26
Bajaj Auto 3,42,324 3,22,235 6.23 3,21,922 3,17,989 1.24 3,18,377 3,22,827 -1.38
Honda 1,98,831 1,36,622

45.53 2,21,540 1,45,729 52.02 2,26,864 1,48,937 52.32
TVS 1,71,551 1,64,183 4.49 1,73,092 1,81,891 -4.84 1,68,693 1,82,456 -7.54

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