November auto wholesale volumes to be driven by demand sustenance: Report

Mumbai: Sustaining demand, refilling inventory and normalising supply-chain bottlenecks at the manufacturer level are expected to drive automobile wholesale volumes for all segments except M&HCV in November with the tractor segment estimated to grow at a whopping 86.5 per cent, a report said on Friday.

The report by brokerage Motilal Oswal Financial Services also said the festive season was reasonable with no major negative surprises.

Wholesales in November are expected to rise year-on-year for all segments, excluding the medium and heavy commercial vehicle(M&HCV) segment, which are expected to grow at 19.6 per cent for two-wheelers on a low base and 12.6 per cent for passenger vehicles due to sustaining demand and inventory refilling.

The CV wholesale volumes are estimated to grow 6.5 per cent on the back of light commercial vehicles, which may see 14 per cent higher volumes in November, restricted by around five per cent decline in M&HCV wholesale volumes, Motilal Oswal Financial Services said.

The wholesale volumes for tractors are expected to grow by 86.5 per cent year-on-year on robust demand, the timing difference of Diwali this year and a low base, it said.

The demand remains skewed towards semi-urban and rural markets for both two-wheelers and passenger vehicles, the report added.

Interaction with leading industry channel partners reflects optimism post the festive season.

According to the report, 2W inventory is currently slightly above normal levels of 35-50 days, while for PVs it is at minimal levels of 10-20 days (with a waiting of up to one month in fast-selling models).

Stating that the LCV demand continued to recover well and is now above last year’s level, the report said the infrastructure/construction sector is driving M&HCVs demand (about 30 per cent of total sales), and though inquiries from haulage are improving, conversions are low.

Demand for tractors continued to remain strong, with a growth in retail, which has a waiting period of 15-30 days. Overall consumer sentiment has improved, but the market remains cautious due to fears of a second wave of Covid-19, the report said.

While the festive season has augured well, with no major negative surprise, current demand and low inventory sentiment suggests higher wholesales in December, according to the report.

The two-wheeler retail sales were flat to slightly negative during the entire festival period starting from the Navaratri to Diwali but the overall PV retail sales during the period were better off than two-wheelers, as per the report.

Demand is also seen sustaining post the festive season as there is a healthy number of bookings with dealers, it added.

In the CV segment, sales have started showing signs of recovery. Inquiries from the cargo segment have increased, but conversion is still low due to the uncertainty in demand sustainability after the festive season, the report stated.

Demand remains encouraging for tractors due to good Kharif sowing and preference for farm mechanisation. Festival sales were encouraging for this segment. Sales remain skewed towards higher HP Tractors due to robust demand from the agriculture segment and minimum inventory (10-20 days) at the dealers end, according to the report.